- Aviation Turbine Fuel prices rose 5.46% to Rs 121.28 per litre on September 1
- ATF prices had increased by Rs 5 per litre in August after a reduction in July
- Fuel costs make up 35-40% of airline operating expenses in India
Air travel during the upcoming festive season of Diwali and Dussehra may burn a hole in your pocket. Aviation Turbine Fuel (ATF) prices for domestic airlines have risen for the second consecutive month, and a continued rise in prices may throw a wrench into holiday travel plans for many families.
ATF prices increased by 5.46% to Rs 121.28 per litre on September 1. The hike is expected to increase operating costs for airlines.
The revision follows a hike of Rs 5 per litre on August 1. Prices had been reduced by Rs 5 per litre in July.
In India, aviation fuel usually accounts for 35 to 40% of an airline's operating expenses. Any change in ATF rates can significantly impact the industry's profitability.
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Airfare To Rise Ahead Of Festive Season
As per a report by Moneycontrol, airlines could offset the increase in fuel costs by increasing ticket prices. However, the hike could depend on demand, competition, and available capacity. Some carriers could choose to absorb some, or all, of the additional charges.
Competition on key routes such as Delhi-Mumbai can also influence airfare costs.
Travel demand usually rises during the festive season. But a jump in airline ticket prices can either drive travellers to take alternative transport, such as trains, or change their travel plans.
The latest jump in ATF prices comes amid high crude oil prices and renewed tensions between the US and Iran. This has raised concerns over global energy supplies. A prolonged disruption may force crude prices higher, putting more pressure on ATF costs and airline margins.
Earlier this year, the government had initiated a price stabilisation scheme for airlines to lock in fuel rates for a specified time period. The measure reduced exposure to global oil price volatility. The airlines were protected from any future increases in ATF rates for up to three years under the scheme.
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However, the scheme was discontinued in July, as per The Hindu Businessline. Sources told the outlet that no domestic airline came forward to sign a memorandum of understanding (MoU) with state-owned oil marketing companies within the scheme's prescribed timeframe.
