Government asks airlines to cut fares to reclaim lost ground
16 December 2008
The government has asked airlines to cut air fares in tune with the reduction in the prices of aviation turbine fuel (ATF), following the latest round of price cuts, which brought jet fuel to a 36-moth low at Rs32,691 a kilolitre in Delhi.
Public sector oil marketing companies slashed ATF prices by 11 per cent, the seventh time since September, after crude oil prices started cooling.
ATF prices are now around December 2005 levels and lower than the pre-hike levels of July 2008 and around 54 per cent of its all-time high of Rs71,028.26 a kiloliter (in Delhi) in August.
The government has moved in the right direction and the reduction in ATF prices should reflect in air fares, said Praful Patel, civil aviation minister. This is the right time for airline industries to consider a reduction in air fare charges, he added further.
The government's views were conveyed by aviation secretary M Madhavan Nambiar who told airline heads to take steps to stimulate the falling demand and get people back into planes.
Private airlines had in the past blamed high fuel prices for their financial woes and have long demanded a reduction in jet fuel prices.
The central government has also called upon state governments that a flat 4 per cent sales tax be imposed on ATF prices throughout the country, instead of the various levies imposed by state governments.
Private airlines have taken Air India's lead to reduce fuel surcharge by Rs400 and the congestion charge by Rs150 last month. This, however, has failed to revive demand for air travel thanks to already high fares, a slowdown in traffic, partly due to increased threat perception at airports.