Airfares Must Rise 10-15% Minimum, Says SpiceJet; Fall in stocks

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Shares of low-cost carrier SpiceJet fell more than 3.5% on Thursday after the company’s chief executive said rising aviation turbine fuel prices were “unsustainable” and airfares were to be increased by at least 10 to 15%.

On BSE, SpiceJet stock fell 3.64% for the latest trade at 42.40 rupees, as the broader market and global risk assets rallied to reappear after heavy selling in earlier sessions .

Ajay Singh, chairman and chief executive of SpiceJet, said on Thursday that the sharp rise in aviation turbine fuel (ATF) prices and the depreciation of the rupee left domestic airlines no choice but to immediately raise airfares.

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Jet fuel prices, which account for nearly 40% of an airline’s operating costs, have hit new highs this year after nine successive increases.

An increase of at least 10-15% in air fares is necessary to ensure that operating costs are better supported. SpiceJet has tried over the past few months to absorb as much of the burden of this fuel price hike as possible, which accounts for more than 50% of our operational costs, Singh said in a statement.

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“ATF prices have increased by more than 120% since June 2021. This massive increase is not sustainable and governments, central and state, must take urgent action to reduce taxes on ATFs which are among the highest in the world,” he said. .

“The weakening of the Indian rupee against the US dollar is still having a significant impact on airlines, as our substantial costs are either denominated in dollars or pegged to the dollar,” added SpiceJet’s CMD.

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In April this year, ATF prices were increased by 2% to Rs 112,924.83 per kilolitre. Later, on May 1, jet fuel prices rose 3.2%, followed by the May 16 rise.

But earlier this month, ATF prices were slashed by state oil marketing companies by Rs 1,564 per kilolitre, to bring the cost of kerosene down to Rs 1,21,475 per kilo from Rs 1,23,039 the kilolitre.

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