Around 1,100 flights a day are flown by Air India, and these cuts show that it’s becoming more expensive for all Indian airlines. Costs are going up as we get closer to Friday, when fuel prices will be looked at.
Scope of cuts and routes affected
Both flights within India and to other countries will have fewer flights, but the long distance routes will be cut back the most in June, and the routes to Europe, North America, Australia and Singapore will be reduced significantly as costs go up.
Air India hasn’t said exactly which cities will be dropped from their routes, but they do say the changes will be flexible. As the price of fuel changes over the next month, the number of seats available will be adjusted to meet the demand and to make sure the airline can operate.
Fuel prices squeeze carriers
The rapidly increasing price of jet fuel has completely thrown off the airline’s budgets. Oil companies are going to announce new prices on Friday, and the airline industry is worried that this will make the problem even worse. According to people in the industry, jet fuel in Delhi now costs almost twice as much as it did in March.
Key price markers underline the squeeze:
– Global jet fuel averaged $179.46 per barrel last week
– That is up 80 percent from $99.40 end-February
– Fuel can be up to 40 percent of airline costs
Airlines are saying that even small price increases, with how little profit they’re making now, can remove any profit and force them to raise ticket prices. The Federation of Indian Airlines warns that even more airlines might stop flying unless costs come down. The government in New Delhi did lower a large price increase on jet fuel for flights within India in early April, but there hasn’t been any help with the price of fuel for international flights.
Operational challenges on long-haul
Because of Air India’s many international flights, it’s being hurt more by the price increase than IndiGo. Long distance flights are much more affected by how much the fuel price changes and any problems with flight paths.
Flights to Europe and North America have had to take longer routes because Pakistan’s airspace is closed, which means they burn more fuel and the crews cost more. Many flights from North America now have to stop in Vienna or Stockholm for technical reasons, and this adds even more to the expense of routes that were already expensive.
Air India has lost over 20,000 crore Rupees. Tata Sons, who owns the airline, and Singapore Airlines, their partner, are feeling more and more pressure to lower costs and get the airline to be financially healthy, especially as unexpected difficulties continue.
Cost measures and customer impact
To spend less money, Air India is planning to no longer include certain things in the ticket price on shorter flights. For example, you may have to pay for your meal on domestic or short international flights, and this could lower the ticket price by over 250 Rupees for passengers who don’t want a meal.
They also plan to charge business class passengers separately for using airport lounges, offering cheaper fares to those who don’t want that service. These changes are to make sure the flights are full, and to be more open with passengers about where their money is going.
A leading person at Air India said they aren’t even covering the costs of running most of their flights. They say if prices keep going up, they’ll have to cancel even more flights. The airline has said future decisions will depend on the price of fuel and how much money each route makes.
What comes next
Airlines and people who fly will be watching the oil companies’ jet fuel price revision on Friday very closely. Experts in the industry say that if the price goes up again, airlines might have to cancel a lot more flights in June.
In a separate matter, the central government has lowered export taxes for the next two weeks starting May 1st. The tax on diesel has been cut from 55.5 Rupees a litre to 23 Rupees, and the tax on Aviation Turbine Fuel (jet fuel) from 42 Rupees a litre to 33 Rupees. There’s no tax on exporting petrol.
Airlines say they really need a lasting reduction in fuel costs. Until that happens, airlines will keep on adjusting their schedules, fares, and what’s included in the ticket price to continue to operate and still offer important international flights.
