The recent news of airfares getting costlier with high excise duty of 14 per cent proposed on jet fuel in the budget 2016 is not so good news for the aviation sector. ATF in India is already 60-70 per cent costlier than global ATF prices. ATF also constitutes the highest component of an airlines operational cost.
It has only been some time when the global fuel prices have stabilized and the Indian aviation industry was heaving a sigh of relief. The airlines in the industry have been bleeding, also as result of the high tax imposed by the government. However, for the sector there is also a rationalization of taxes on MRO services.
From the customer’s perspective this is why it matters:
1. There is already a decreasing gap between the fares of Low Cost Carriers and Full-time service carriers. With another hike it will pinch the passengers even further
2. There is an increased dependency on air travel for covering mid-long haul journey. There is no viable alternative, really to plan a journey on emergency as the Indian railways are already very over-crowded
3. There has been no change in the flying experience since its inception. Travelers have been long waiting to witness some value-add to their flying experience. Even the airlines have been trying to diversify their offerings like a premium economy innovation to fill up occupancy
4. The travelling population in India is growing, and so is the choice of destinations. Expensive travelling options during the peak season only deters income generated from the sector
5. Occupancy is still low on short routes as it is not considered to be value for money. This situation will add to the airlines and customers woes