Express Industry demands domestic airlines to cut fuel surcharge

Calls for a transparent and market driven mechanism to determine pricing

Mumbai, January 27, 2015: Following the sharp fall in global crude oil prices by nearly 35 percent over the last one year, the Express Industry Council of India (EICI), the apex body of companies providing express delivery services, have asked for an immediate withdrawal of Fuel Surcharge (FSC) levied by domestic airlines. Currently, domestic airlines in India charge between Rs. 13/- to Rs.16.50/- per kilogram as fuel surcharge.

The industry has also sought the intervention of the Civil Aviation Ministry and the Director General of Civil Aviation (DGCA) for an immediate redress of the current issue and the long term demand for the trade to have a transparent and market driven mechanism for determining such pricing. 

Fuel surcharge on shipments is levied on a per kilogram basis and was introduced in May 2008 to mitigate volatility in fuel prices. Air Turbine Fuel (ATF) prices then was Rs. 58387/kl (referenced to Delhi Airport) and the FSC was fixed by airlines at Rs. 5/kg for cargo shipments. “Currently, the ATF price is at Rs. 52423/kl which is 10% lower than the 2008 price but the FSC charged is as high as Rs. 16.50/kg for the cargo shipments. In the past as well when fuel prices fell, airlines continued to increase their FSC. Airlines need to appreciate that FSC is purely a tool to mitigate volatility and cannot be part of cargo rates”, said Vijay Kumar, Chief Operating Officer, Express Industry Council of India.

Globally, airlines benchmark FSCs to a reference like Brent crude movement or an index like USGC (published by US Department of Energy). Even in India, Blue Dart Aviation, a cargo airline references their FSC to a Brent index. “ This will be fair to the trade and bring down transaction costs of the Indian businesses using air cargo including the large number of micro exporters and medium and small industries, a key component of governments ‘Make in India’ campaign”, added Vijay Kumar.

Month	Rate	FSC
		Indigo	Spice jet	Jet Airways	Air India	Kingfisher	Go Air
15-May-08	58,387.92	5.00	5.00	5.00	5.00	5.00
16-May-09	32,199.01	3.00	5.00	6.00	3.00	2.00
16-May-10	42,556.00	5.00	5.00	7.00	3.00	5.00
16-May-11	58,794.00	7.00	7.00	9.00	4.00	7.00
16-May-12	67,046.95	9.00	10.00	10.00	9.00	10.00
1-May-13	62,650.00	15.00	15.00	15.00	13.00		13.00
1-May-14	71,034.00	15.00	15.00	15.00	13.00		13.00
1-Dec-14	59,943.00	16.50	15.00	16.00	14.00		13.00

Jet Airways has reduced the surcharge by one rupee (to Rs 15) from February 1, but the reduction is negligible. The industry wants the airlines to stop charging fuel surcharge immediately.

About EICI:

Express Industry Council of India is an association that aims to protect and promote the common interests of Express Industry and its members. Its activities include interacting with the Government, the Customs, other Government Agencies and other like-minded bodies. EICI operates the common user express terminals at Mumbai, Delhi and Bangalore  international airports for clearance of express shipments. EICI has been successful in eradicating major bottlenecks and delays caused to Express Industry.