Aviation Fuel Price Increases To Rs 39,069/Kilolitre; Will Indigo, SpiceJet, Vistara Increase Fares?
Despite the prices of global crude oil falling by about 35.29% everywhere, since the last 12 months, the latter has been showing steep surge in prices in India.
This has now decided to pay a toll on the aviation sector.
This is because there has been registered, a steep hike in the prices of aviation turbine fuel, or ATF across major Indian cities.
ATF Price Hike
Due to the Covid-19 pandemic scenario, air travel internationally as well as domestically has fallen down in significant numbers. The revenue generated by airlines are not just less but also burdened.After the price hike in June 1 for Delhi, which secured a record high number of 56.5%, the recent hike is registered as the 2nd straight increase in ATF price in June.
On top of that, the aviation turbine fuel prices are increasing steadily.
Among the different factors that affect the costs endured by airline companies, a very significant section that contributes to the costs is the price of ATF.
About 35-50% of the total costs incurred by the airlines, is contributed by aviation turbine fuel.
Now that domestic airlines are struggling to keep their costs to a minimum, the steep rise in ATF prices is bound to put a pressure on their finances.
What are the Actual Hike Numbers?
The price of ATF is a subject of the state. It has been hiked by 16.3% and is now available for Rs 39,069.87 per kiloliter in New Delhi, as of last week.
The information is provided by Indian Oil Corporation Limited (IOCL).
The fuel prices have been on the rise substantially through June, after airlines resumed domestic operations post lockdown.
After the price hike in June 1 for Delhi, which secured a record high number of 56.5%, the recent hike is registered as the 2nd straight increase in ATF price in June.
This price revision was made on June 16.
After this, these are how the current surged ATF prices across major cities in India look like:
- Kolkata: Rs 44,024.10
- Mumbai: Rs 38,565.06
- Chennai: Rs 40,239.63
Crude oil prices closed at $42.19 a barrel on Friday.
How will this Affect Airlines?
Due to the fuel hike scenario in India today, the Indian airlines have to pay at least 40-50% more as compared to other countries, for ATF prices.
In addition, they do not even have the option to purchase the ATF from other countries for a cheaper option, as international operations are closed.
A senior airline stated that due to this extraordinary hike in fuel prices, the addition of more flights and routes will turn out to be more difficult for airlines to cover their variable costs.
It is to be noted that after starting its operations from May last week onwards, domestic airlines have been operating at 33% below their capacities.
Yet, the government wants them to expand capacity to 45% and eventually to 50-55% in the coming months. This is quite impractical, as the load is not expected to improve any time soon during the Covid level.
How Will You be Affected?
Clearly, as the prices in fuel for aviation increase, there will have to be compensation from somewhere.
According to a Vistara airlines’ spokesperson, despite the significant hike in ATF prices, they will try their best to review their network and trim non customer-facing expenses.
However, the sad truth here is that with all these going on, passengers will have to bear the brunt of rising ATF prices as airlines will have no options but to pass it on.