Domestic air travel gets costlier with new cess
Domestic flights will get dearer with a new regional cess kicking in from Friday and oil companies hiking jet fuel prices by 4%.
The Directorate General of Civil Aviation (DGCA) issued an order levying Rs 5,000 per domestic flight from Friday to create a regional connectivity fund.This fund will be used to provide viability gap funding to regional flights and help cap fares for such flights at Rs 2,500 per hour.Due to this, domestic flights between metros and other big cities will cost anywhere from Rs 40 to Rs 100 more, say airline officials.This extra cost will be borne by domestic flyers between metros and other big cities.
While the regional cess is a new levy , fluctuating oil prices delivered a shock to flyers. Oil marketing companies hiked ATF prices by a steep 4% from Friday. In Delhi, for instance, Indian Oil Corp site shows ATF will now cost Rs 50,020 per kilolitre (KL) for domestic airlines compared to Rs 48,110 on August 1.
The combined impact of these two could see airfares in coming festive season shooting up. While airlines did not say how this hike will impact fares, they said any increased operating cost will have to be passed on to consumers. (See box) “The regional cess and hiked ATF prices coming into effect from Friday will mean increase in fares as demand for travel also shoots up in the festive season. Best will be for people to book tickets in advance as buying the same closer to date of travel will mean paying more,“ said an airline official. Airlines have different fare buckets for each flight and keep a certain number of seats in each fare bucket. As the seats on a flight get sold, fares move to the next higher level.
Meanwhile, the regional cess was kicked in by an order of Directorate General of Civil Aviation chief B S Bhullar which said: “Central government has decided to revise the date of levy on scheduled flights being operated within India to fund regional air connectivity fund at a uniform rate of Rs 5,000 per flight till further revision. The said levy will now come into effect from September 1, 2017.“