Tuesday, November 02, 2021

ATF price hike set to hurt aviation, travel rebound

The sharp increase in prices of air turbine fuel (ATF) is set to impact the rebound of the aviation and travel industry as it would result in fares going up, but not to the extent that it would keep airlines from recovering the cost of their operations.

"Increase in fuel prices and depreciating rupee are set to impact the airline sector hard, especially at a time the industry is trying to come out of the Covid-19 crisis. It is going to be a difficult time for us ahead," said an airline executive, who did not want to be identified.

On Monday, oil companies increased ATF prices 13.9% over that in October to ₹82,638 per kilolitre in Delhi. With this increase, jet fuel prices are about 95.8% higher than in November 2020. Airlines say jet fuel prices account for up to 40% of the total cost of operations in India, one of the highest in the world.

A travel industry watcher said the fares are already high on the back of a surge in demand for flights from leisure travellers as well as visiting friends and family traffic, and that any further increase would impact rebound of the sector, which is among the worst hit by the pandemic.

"Fares are high and shooting through the roof on routes with demand from leisure travellers. I do not think the aviation and travel sectors will ever revive with this kind of structure," said Ajay Prakash, president, Travel Agents Federation of India (TAFI). "With this further hike in ATF, fares will go further up and add to it the overall impact of petrol and diesel prices, I do not see any revival of the travel and tourism sectors."

However, others said it would be difficult for airlines to pass on the increase in cost of operations to passengers due to competition and predicted losses for airlines.

02/11/21 Mihir Mishra/Economic Times

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