Global Economics

Soaring Fares Force Indian Companies to Fly Economy Class


Companies like Maruti Suzuki, M&M, TCS, and ABN Amro Bank want executives to fly economy class instead of business or first class

The sharp spurt in air fares, which has already affected budget travel, is now taking a toll on business class travel too. Skyrocketing travel costs are forcing corporate houses to trim travel budgets. Companies like Maruti Suzuki, M&M, TCS and ABN Amro Bank want executives to fly economy class instead of business or first class. While some have already issued instructions to this effect, others plan to follow suit.

Many small firms have advised their executives to take the train for short-distance journeys. "We have asked people to curtail their travel budget as it is getting expensive due to periodic increase in air fares," an M&M official said.

Business class air fare has risen about 60% in one year. For instance, a business class ticket costs about Rs 17,000, compared to nearly Rs 11,000 a year ago. Though fares rose gradually (airlines only raised fuel surcharge and kept base fare intact) in the first six months, they have risen rapidly in the past six months. An estimate shows air fare has risen up to 40% (through hikes in fuel surcharge) in the past six months.

"We would review the external situation and decide on whether executives can continue to travel in business class after our company reopens on July 1 after shutdown for maintenance," said Maruti Suzuki's chief GM of HR, SY Siddiqui.

On account of high jet fuel prices, airlines have been effecting a hike in fuel surcharge to pass on partial financial burden to passengers. ATF prices have risen 100% in the past year and have tripled in the past four years, climbing from Rs 21,000 per kilo litre in 2004 to more than Rs 70,000 now. Airlines plan to further increase fares as they are unable to recover losses at current fares.

Asked if the company has reduced the number of people entitled to travel business class, Vasantha Kumar, ABN Amro's V-P of communication and marketing, said: "It's not only a function of air fare, there are other things also which require you to cut travel costs."

By Nirbhay Kumar

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