IndiGo Managing Director Rahul Bhatia has urged the government to rationalise taxes on aviation turbine fuel (ATF) and airport charges, saying lower airfares could unlock “massive” demand in India’s price-sensitive aviation market, PTI reported on Thursday.
Arguing that air travel has become a public utility, Bhatia said it continues to be taxed “as if it’s an elitist mode of transport”, making it difficult to keep fares affordable.
“I think some of these things have to get rationalised. Because the Indian consumer is so price sensitive that if you can lower fares, you just open up a massive demand,” he said in the report.
Bhatia’s remarks come as airlines face mounting cost pressures from higher ATF prices and longer flying times due to airspace restrictions arising from the West Asia conflict.
He said carriers have absorbed much of the increase in operating costs instead of passing it on to passengers. Over the past three years, while inflation has risen by around 12 per cent, fares retained by airlines have increased by only 1-3 per cent, he said. During the same period, airport User Development Fee (UDF) charges have surged by as much as 95 per cent, while landing and parking charges have risen by up to 34 per cent.
Bhatia said IndiGo, which held a 66.3 per cent share of India’s domestic aviation market in June, has a responsibility to lead fare increases when higher costs make them unavoidable.
“If the fuel goes up 30 per cent and nobody raises fares, it’s an excruciating pain for the industry,” he said, adding that airlines also bring fares down when market conditions allow.
ATF accounts for about 40 per cent of an airline’s operating costs. Bhatia said IndiGo’s best protection against fuel price volatility is inducting more fuel-efficient aircraft, adding that, to the best of his knowledge, no Indian airline currently hedges jet fuel prices.
Responding to concerns over IndiGo’s market dominance, Bhatia said nearly one-third of the airline’s capacity is deployed on around 250 unique city pairs where it has created new markets rather than competing with other carriers.
He argued that after excluding these routes, IndiGo’s share in competitive domestic markets falls to the low-40 per cent range. Internationally, the airline accounts for only about 20 per cent of the market, he added.
“There is a collective responsibility on airlines, airports, certainly with the government on taxes, to make sure that we have an abundant offering that is attractive because the market is 1.4 billion people,” Bhatia told PTI.
India is among the world’s fastest-growing aviation markets. IndiGo operates more than 2,100 flights daily and has an operational fleet of over 400 aircraft.
