Will AERA Relief Stop Airlines From Hiking Ticket Prices? Here’s What’s Driving Costs

The Airports Economic Regulatory Authority (AERA) has given a temporary relief to flight carriers struggling against margin pressure and rising operational cost due to a rise in fuel prices by announcing a 25 per cent decrease in landing and parking charges at all major airports.

The relaxation is given only for three months as of now.

The airline industry is facing a direct heat from geopolitical turmoil in the West Asia, with the disruption in crude oil supply causing a shoot up in the prices of Air Turbine Fuel (ATF).

As fuel is a major component in the operational cost of an airline, it squeezes margin of the airlines, prompting them to hike air tickets to offset the cost. The relaxation in parking and landing charges won’t alone reduce margin pressure

on airline companies.

The regulator clarified that any revenue shortfall arising from the reduced charges will be adjusted in future tariff cycles through the Aggregate Revenue Requirement (ARR) mechanism.

This measure applies to all major domestic flight carriers.

Air India on Tuesday announced to hike fuel surcharge per passenger based on distance from April 08 after the Ministry of Petroleum & Natural Gas’ and Ministry of Civil Aviation’s decision to cap domestic Aviation Turbine Fuel (ATF) price hike at 25%.

The price of aviation turbine fuel (ATF) for domestic scheduled airlines had been increased across metro cities effective April 1.

The Ministry of Petroleum and Natural Gas said ATF prices, deregulated since 2001 and linked to international benchmarks, were expected to rise by over 100% amid the closure of the Strait of Hormuz and extreme volatility in global energy markets.