With 16% rise in ATF prices, airlines set to hike fares

BL New Delhi Bureau | Updated on: Jun 16, 2022

| Photo Credit: AMIT DAVE

A minimum 10-15% increase in air fares is required, says Spicejet chief

Public sector oil marketing companies, on Thursday, raised Aviation Turbine Fuel (ATF) prices by 16 per cent, which pushed the prices to all-time high.

With the latest hike, airline operators have indicated fare hike as ATF cost is nearly 40 per cent of the total operating cost of a flight. ATF prices are revised on the 1st and 16th of every month, based on the average of benchmark international rates.

According to the price notification by companies, prices of ATF was raised by ₹19,757.13 per kilolitre to ₹1,41,232.87 per kl in Delhi.  The increase is in step with the firming international oil rates. Brent, the world’s most popular crude oil benchmark, was trading on Thursday at $119.16 per barrel, the highest in almost a decade.

ATF in Mumbai now costs ₹1,40,092.74 per kl, while it is priced at ₹1,46,322.23 in Kolkata and ₹1,46,215.85 in Chennai.

Fuel rates have been on the rise in India due to the global surge in energy prices, on the back of supply concerns following Russia‘s invasion of Ukraine and demand returning after being hit by the pandemic. India depends on imports to meet 85 per cent of its oil needs. To compound things, the rupee has depreciated against the US dollar, making imports costlier.

Ajay Singh, Chairman and Managing Director of budget airline Spicejet, said the sharp increase in ATF prices and the depreciation of the rupee have left the domestic airlines with no choice but to immediately raise airfares. “A minimum 10-15 per cent increase in air fares is required to ensure that cost of operations is better sustained,” he said in a statement.

Further, he said ATF prices have increased by more than 120 per cent since June 2021. This massive increase is not sustainable and governments — Central and States — need to take urgent action to reduce taxes on ATF, which is among the highest in the world. SpiceJet has, in the last few months, tried to absorb as much burden of this fuel price rise, which constitutes more than 50 per cent of our operational cost, as we could, he said.

“The weakening of the rupee against the US dollar further significantly impacts airlines as our substantial cost is either dollar denominated or pegged to the dollar,” said Singh.

Published on June 16, 2022
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