Input costs growing, says IA

By Gargi Parsai

NEW DELHI, APRIL 8. After holding out for some months against its competitor in the domestic sector and gaining traffic in the process, Indian Airlines is now planning to revise fares by 10 to 15 per cent on select routes.

The fare revision being worked out is likely to be on the trunk and tourist routes. But there might be reduction on some feeder routes in the ``flexible fare policy'' the airline proposes to adopt. A committee has been set up to give suggestions before the month is out on fare rationalisation or flexi-fare.

The Indian Airlines board cleared the proposal in its meeting last fortnight. It gave its approval to set a maximum ceiling of 30 per cent on major routes and 15 per cent in category II sectors.

The airline has reported a loss of about Rs. 175 crores in 2000- 2001, basically on account of two revisions in the fuel price and in airport charges during the year. The de- regulation of fuel resulting in lower rates announced last week will impact input costs only next year, sources said.

Making a shift from the past when across-the-board fare revisions were done, the IA management has sought flexibility in playing around with fares in relation to the market, the revenues, the demand and supply position, the competitor strength and so on. ``Now that we have consolidated our position in the market, we are looking at flexi-fare which is a region-to-region, season-to- season, peak time-to-peak time fare variation, instead of a static fare structure which is revised at one go,'' the chairman- cum-managing director of Indian Airlines, Mr. Sunil Arora, told The Hindu.

The rationalisation for the revision is the increase in input costs, primarily the aviation turbine fuel costs which were hiked by about 30 per cent twice last year. Since October 1998, when fares were last revised by 11.2 per cent across the board, the fuel cost is up by Rs. 336 crores, landing and navigation charges are up by Rs. 36 crores and the increase in the rate of exchange and aircraft maintenance is around Rs. 135 crores. Revised service agreement with pilots has cost the management another Rs. 35 crores.

Had the fuel costs not gone up the airline would have made a profit of about Rs. 50 crores, sources said. Indian Airlines' competitor in the domestic sector, Jet Airways, had raised fares by up to 15 per cent after the second hike in fuel prices in October last. Indian Airlines held out and managed to recover traffic.

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