State-owned fuel retailers have hiked the Aviation turbine fuel (ATF) to Rs 50, 978.78 per kilolitre (kl) in Delhi. This is a rise of almost 3.69 per cent or Rs 1, 817.62 per kilolitre. This is the third time the retailers have increased the rates in one month on firming international oil prices.
Prior to this, the rates were revised on December 16 when the ATF prices were up by 10 per cent over last month. Along with this, the Rupee has depreciated 2 per cent over last January, too.
However, this is unlikely to affect the airlines because the air traffic is down 40 per cent over last January. That aside, with the new mutant covid 19, international services have been restricted to only Vande Bharat and Air bubbles flights.
“Luckily, the increase in ATF has been in line with the increase in air traffic. However, with the input costs, airlines have not been allowed to increase the lower fare cap threshold. Thus, in my opinion, the impact will be minimal," said Ameya Joshi, aviation blogger, and founder of Network Thoughts.
He explained that, in normal times, the fuel cost is 40 per cent of the total operational costs, however, since the airlines aren't operating their entire fleets, it may not be that impactful.
Having said that, airlines usually hedge fuel costs in advance when the costs are lower. Joshi said that it doesn't look like at the moment Indian airlines have hedged any fuel. “Prior to the pandemic, AirAsia BHD had hedged the fuel despite higher rates, we all know the outcome of that. If other airlines follow the same route as AirAsia, they too, are likely to end up like them ,” he added.
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