New Delhi: In the aftermath of the drone attacks on two oil facilities in Saudi Arabia, airfares in India could go up. But it’s too early to predict, said industry stakeholders.
According to a report in Mint, a Vistara spokesperson has said that airfares are based on multiple factors and are not directly linked to crude prices. But the rise in oil prices would certainly increase costs.
“Rise in oil prices would certainly increase costs, affecting an industry that anyway has much higher average costs in India, but some of the lowest fares in the world,” the spokesperson said.
Following the drone attack on September 14, which disrupted oil supplies, crude oil prices jumped nearly 20 per cent before settling down to a 10 per cent rise. If the prices keep on rising, the airfares will shoot up ahead of the festive season, which in any case witness a hike of 10 to 15 per cent in October-November.
“If the crude oil price keeps on rising we will have to decide on hiking airfares. We are closely monitoring the crude oil prices,” a senior Air India executive said to the Business Standard.
According to the BS report, The national carrier, which is already struggling with its fuel payments, spends around Rs 6,000-7,000 crore annually on fuel. A 10 per cent hike in crude price would mean over Rs 50-58 crore of extra costs for the airline.
Rating agency Crisil had last week projected ticket prices to rise 7-9 per cent this fiscal because of limited capacity addition since the grounding of Jet Airways.
Crisil also has forecast domestic passengers traffic to grow 6-8 per cent in FY20, as against a healthy 19 per cent growth registered in the year ended March 2019, on account of non-revival of Jet Airways, which ceased all operations in April due to liquidity crisis and is now under insolvency proceedings.
The 7-9 per cent rise in airfares will be the highest since fiscal 2013, which had seen Kingfisher Airlines going bust.