Mumbai: IndiGo will add fuel surcharge to the ticket price on domestic routes from 30 May after a sharp uptick in oil prices and a depreciating rupee, which are causing a huge cost burden for the airline, the no-frill carrier said on Tuesday.
“A sum of Rs200 will be added on routes less than 1,000 km distance, and Rs400 on routes longer than 1,000 km,” IndiGo said, adding that under the current scenario, levying a surcharge becomes inevitable for a low cost airline.
IndiGo’s Chief Commercial Officer Sanjay Kumar said that with jet fuel prices in India having risen around 25% in the current month compared to the same period last year, and at the highest in last three years, the airline is compelled to pass some of the increased cost burden to customers as a fuel surcharge.
“In the context of the past decade, where airfares in India have reduced by nearly 50 percent in real terms (i.e. adjusted for inflation), we are confident that this marginal increase in the form of fuel surcharge will not have any significant adverse impact on demand,” Kumar added.
Rising fuel costs and a depreciating rupee are key concerns for the airline industry, which counts fuel costs as a major portion of its total costs. Airlines in India also make payment in dollars for salaries of expats, payment for maintenance and overhaul, purchase of new aircraft and for buying jet fuel.
However, with India being a price sensitive market when it comes to commercial aviation, airlines often struggle to pass on costs to customers.
SpiceJet Chairman Ajay Singh had said earlier this month that Indian Airlines may have to absorb the impact of rising fuel prices, a move that would affect their profitability, if crude oil prices increase further.
Meanwhile, IndiGo in its statement added that the reintroduction of fuel surcharges will not much impact the low fares that are being charged, and will not change IndiGo’s positioning as a low cost carrier.