Fares drop as airlines slash fuel surcharges

Domestic airlines followed up on a drop in aviation fuel prices by slashing fuel surcharges on Tuesday.

The Airline Operators Association of Nepal (AOAN) said the fuel surcharge added to the price of a plane ticket had been slashed by Rs90 to Rs310 depending on the distance. The new airfares will go into effect on Wednesday.

This is the fourth time this year that airlines have cut the fuel surcharge with aviation fuel prices hitting a six-year low. On Monday, Nepal Oil Corporation (NOC) slashed the price of aviation fuel sold to domestic airlines by Rs8 per litre to Rs86 per litre. The state-owned oil monopoly makes a profit of Rs10.71 per litre under the new tariff.

Jet fuel sold to international carriers will cost $750 per kilolitre, down $81 per kilolitre, giving NOC a profit of Rs18.93 per litre.

Airlines are required to cut fuel surcharges when prices drop by Rs4 per litre under a Civil Aviation Authority of Nepal (Caan) set formula. They are allowed to increase the surcharge when fuel prices rise by Rs4 or more per litre.

NOC Spokesperson Bhanubhakta Khanal said fuel prices were revised downward after receiving the latest price list from the supplier Indian Oil Corporation on Sunday.

“Lower fuel surcharges have provided relief to travellers,” said Ghanshyam Acharya, spokesperson for the AOAN. Airlines currently have a 90 percent occupancy rate, and cheaper tickets are likely to push it up, he said.

Breaking down the surcharge by sector, the fuel surcharge on the Kathmandu-Dhangadhi route has been reduced by Rs310. With this revision, the price of a ticket has come down to Rs10,100.

The lowest cut has been made on the Kathmandu-Simara route. With the fuel surcharge being slashed by Rs90, the flight now costs Rs2,505. A comparisons of airfares for the last two years shows that a flight from Kathmandu to Dhangadhi, the longest route in the domestic sector, has become cheaper by Rs1,300. In December 2014, a ticket on the flight cost Rs11,405.

Likewise, airfares on the Bhairahawa and Bhadrapur flights have come down by Rs1,000 each in the last two years.

Domestic carriers posted double-digit growth in passenger carriage in the first half of 2016, pulling out of a four-year dive as travellers chose to fly rather than drive over bone-jarring national highways.

According to Tribhuvan International Airport (TIA), domestic airline passenger traffic jumped 10.82 percent to 741,128 during the January-June period. The statistics show that domestic carriers received 72,388 additional fliers in the first six months of 2016 year-on-year.

Passenger movement has been on a constant decline since 2012, marking a departure from the robust growth rates seen since 2008 when airlines were flying high due to competitive airfares and constant protests and road blockades forcing travellers to take to the air.

Airlines saw a heady growth of 13 percent in 2008 which jumped to 33 percent in 2009 as they cut fares amid stiff competition. Although passenger movement increased 12.83 percent in 2010, the growth rate started dropping in 2011 and has shown a negative growth since 2012.ek