Fuel surcharge unlikely to recoup IndiGo’s rapidly rising costs

livemint.com:

₹350 crore to ₹400 crore a month thanks to this fuel charge, which varies between ₹300 to ₹1,000 per flight, depending on the distance. On the face of it there is nothing exceptional about the fuel charge. In the early 2000s when Kingfisher, Jet Airways and Air Sahara were operational, they levied a fuel surcharge when aviation turbine fuel (ATF) prices shot up and displayed it as a separate part of the airfare.

But after the airlines were accused of cartelisation (as at the time all airlines increased the fuel charge by the same amount), the industry decided to merge the cost of fuel with the basic fare component, making it difficult to figure out how much of the increased fuel costs airlines incurred were being passed on to passengers. Is IndiGo’s recent hike only going to cover the increased fuel costs, or will it also help it recoup from passengers some of the other costs that it and other domestic airlines are saddled with? ATF accounts for between 35-40% of an airline’s operating costs and domestic ATF prices have increased more than 5% since September. Normally, domestic airlines are financially comfortable when a barrel of ATF costs around $60.

However, it now costs $80, having even shot up above $100. IndiGo's other financial burden comes from the fluctuations in the rupee vis-à-vis other international currencies. This has a direct impact on airlines’ cost of operations.