Budget 2016: Tighten your seat belts but happy landings too
TNN | Mar 1, 2016, 02.29 AM ISTBudget 2016: Tighten your seat belts but happy landings too
Flying will get more expensive with finance minister Arun Jaitley raising the excise duty on aviation turbine fuel (ATF), the single largest input cost item for airlines. A one-way Delhi-Mumbai air ticket, which on an average comes for Rs 5,000, could cost up to Rs 200 more. And a Delhi-New York return ticket that sells for about Rs 70,000, could cost about Rs 1,400 more.
"Excise duty on ATF has been hiked from 8% to 14%. Given that ATF accounts for almost 40% of an airline's operating cost, the 6 percentage point increase in excise duty will mean a hike of 2.5% in cost. Coupled with sales tax levied on the hiked excise portion, the overall impact could see up to a 4% increase in ticket prices," said Sharat Dhall, president of Yatra.
Airline stocks fell on Monday. While BSE closed the closed the day 0.66% lower, IndiGo, Jet Airways and SpiceJet closed 2.5%, 2.6% and 3.4% lower, respectively. Most airlines said they will have to pass on the cost hike to passengers while a handful said they may absorb the increase due to low oil price and competition.
Air India was worried for one more reason apart from the ATF price hike. The airline had sought Rs 3,901.5 crore but the Budget gave it less than half, Rs 1,713 crore. AI will now seek supplementary demand for the shortfall. There was some cheer for international air travellers. "Customs baggage rules for international passengers are being simplified to increase free baggage allowance. The filing of baggage declaration will be required only for those passengers who carry dutiable goods," Jaitley said.
The government also gave a push to regional aerial connectivity, planning to cap fares at Rs 2,500 per hour and give viability gap funding to airlines operating on such sectors. "The government is drawing up an action plan for the revival of unserved and underserved airports. There are about 160 airports and air strips that can be revived at an indicative cost of Rs 50 crore to Rs 100 crore each," Jaitley said.
"Excise duty on ATF has been hiked from 8% to 14%. Given that ATF accounts for almost 40% of an airline's operating cost, the 6 percentage point increase in excise duty will mean a hike of 2.5% in cost. Coupled with sales tax levied on the hiked excise portion, the overall impact could see up to a 4% increase in ticket prices," said Sharat Dhall, president of Yatra.
Airline stocks fell on Monday. While BSE closed the closed the day 0.66% lower, IndiGo, Jet Airways and SpiceJet closed 2.5%, 2.6% and 3.4% lower, respectively. Most airlines said they will have to pass on the cost hike to passengers while a handful said they may absorb the increase due to low oil price and competition.
Air India was worried for one more reason apart from the ATF price hike. The airline had sought Rs 3,901.5 crore but the Budget gave it less than half, Rs 1,713 crore. AI will now seek supplementary demand for the shortfall. There was some cheer for international air travellers. "Customs baggage rules for international passengers are being simplified to increase free baggage allowance. The filing of baggage declaration will be required only for those passengers who carry dutiable goods," Jaitley said.
The government also gave a push to regional aerial connectivity, planning to cap fares at Rs 2,500 per hour and give viability gap funding to airlines operating on such sectors. "The government is drawing up an action plan for the revival of unserved and underserved airports. There are about 160 airports and air strips that can be revived at an indicative cost of Rs 50 crore to Rs 100 crore each," Jaitley said.
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