Thaindian News

New Delhi, Sep 16 (IANS) Indian domestic airlines are set to increase airfares as a result of the latest hike of 2.5 percent in aviation fuel prices by the state-run oil marketing companies (OMC), sources said Friday.

“This (rise) may happen as the fuel prices are up again. But we have to see what the other industry players are doing and only then we will go ahead with any such hikes,” a senior Air India official told IANS on the condition of anonymity.

The industry may see this as a good opportunity to raise prices to offset inflationary pressures, he said.

“I do not think a slight price increase would dampen load factors as the festive season is about to begin,” the official added.

The OMCs had Thursday increased aviation fuel prices by 2.5 percent at Rs.57,689 per kilolitre in the national capital in their fortnightly review of international oil prices.

The increase has come after two consecutive cuts Aug 16 and Sep 1.

“This increase has also put the prices almost where they were earlier. So there is pressure which has started building up,” the airline official said adding that the concern is justified because fuel contributes to 40 percent of total cost in the industry.

Even aviation experts feel that the industry needs to off-set the increasing cost pressures in a moderate manner to make the sector more sustainable.

“The industry has been depressed for the last two quarters due to inflationary pressures and low load factors, so this may be the optimal time to go for a moderate price hike to off-set the cost increase and to make the industry sustainable,” Director-Aviation at global consultancy firm KPMG Amber Dubey told IANS.