Wednesday, March 16, 2022

Air Travel In India To Get Costlier As Oil Retailers Increase ATF Prices

The aviation turbine fuel (ATF) prices have been hiked by 18 per cent to cross the Rs 1 lakh per kilolitre mark for the first time. This is the sixth time that ATF prices have been hiked this year. 

The ATF prices are revised on the 1st and 16th of every month depending on the average international crude oil prices in the preceding fortnight. Over the past few weeks, the crude oil prices have soared to a 7-year high nearing $140 per barrel, as the Russian invasion of Ukraine escalated. 

Experts pointed out that with an increase in ATF prices, the prices of air tickets will also increase. 

Amrit Padurangi, who is the former head of Infrastructure in Deloitte said, “The air ticket prices will marginally increase because the Indian aviation companies would love to increase much steeper prices. But, when you increase the ticket prices by a high percentage the demand drops immediately both for the business segment as well as for the non-business segments because people will defer their holidays’ people will travel by other means, in the business segment. So, clearly, it is not going to be easy to increase the prices substantially.”

 “They will do marginal increases because without that the losses will be very high. But anything very significant will not be accepted by the traveling public. So we have to wait and see if any one of the aviation companies behaves very erratically and comes with the highest discount, then everybody will have to go for it,” he added.

Airlines in India have earlier urged the civil aviation ministry to increase caps on domestic fares, given the sharp rise in prices of aviation turbine fuel over the past two months and expectations that crude oil prices are expected to remain high due to the Russia-Ukraine conflict.

“Indian aviation companies don't have access to an option because if they don't hike prices the losses will continue in a much bigger way because oil prices are high, the ATF prices are high. Even with the current level of pricing, there will be losses and if they don't hike it, the losses will continue in a big way. So I think they will increase but only marginally,” Padurangi noted.

Earlier this year, Indigo posted a profit in the three-month period ending December 31, 2021, after seven successive quarters of losses, thus bringing cheer to the loss-making aviation industry. Similarly, Air India has been taken over by Tata Group and a resolution plan for Jet Airways is underway. 

16/03/22 Astha Oriel/Outlook

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