ATF prices down 40% since October, but air tickets still cost a bomb

New Delhi: The price of jet fuel in Delhi alone has fallen by about 40 percent but have air tickets become cheaper by such a huge margin since October? Without even checking with airlines, one can correctly answer that question: No. And from what Minister of State for Civil Aviation Mahesh Sharma said in a written reply in the Rajya Sabha today, there is little hope of air travel becoming cheaper, never mind falling ATF prices.

Sharma said his ministry has conducted no analysis to find out if airlines actually passed on this reduction in ATF prices to consumers because the government does not regulate airfares. To another question on whether there was any move to cap highest fares at Rs 20,000, again the minister said no fare regulation was being done.

ATF constitutes about 40-50 percent of operational cost of an airline in India, depending upon an airline’s business model. According to government data, the price of ATF in Delhi in Rs/KL was Rs 67,525 in October 2014 and has fallen steadily since to settle at Rs 50,363 in March. Sharma said airline are free to fix reasonable charges/fee subject to compliance with rule 135 of Aircraft Rules 1937.

As we have pointed out earlier, a move if afoot to regulate airfares within the Ministry of Civil Aviation, with senior officials indicating that they have been asked to study some models of airfare regulation, if it exists, in other countries. An internal note circulated within the ministry some weeks back had suggested that minimum fares be determined for each airline and each route whereas maximum be capped at Rs 20,000. Officials had pointed out that they have received “hundreds” of complaints from MPs, specially for flights to the North East destinations.

In reply to another question, Sharma said SpiceJet has been asked to give a weekly status report on availability of aircraft for operations and details of bookings. He said not all low cost airlines have been asked for this data and SpiceJet has been asked because of the liquidity crisis it faced in December last year.

It is pertinent to mention here that the liquidity crisis of SpiceJet forced it to briefly ground operations in December and thereafter, little is known of its dues to various stakeholders. There is no clarity on whether the airline has cleared dues to Airports Authority of India, to lessors and other creditors.