Air travel is set to get costlier. The latest hike in prices of aviation turbine fuel (ATF) will have a direct impact on airfares, said airlines.
ATF or jet fuel price was hiked by a steep 9.2% on Wednesday – the fourth hike in the last five months.
“Yes, fares are likely to go up,” said an Air India official, who did not wish to be named. “Fares had fallen steeply in the past one year but the increase in fuel prices by nearly 35% over the last three months consecutively is going to erode the profitability of airlines,” he said.
ATF price in Delhi was hiked from Rs 3,945.47 per kilolitre to Rs 46,729.48 per kl. ATF is the single largest contributor to airline costs and accounts for 45% of the operating cost of Indian carriers.
“This is a big hike. Rise in fuel prices will have a direct impact on fares as the hike would be passed on to the customer,” said an official of a budget airline.
“Whereas oil companies steeply increase ATF prices when crude goes up they are not passing on commensurate decrease in ATF prices when crude goes down,” said another airline official.
Airlines said the rising oil prices will also have a significant impact on their finances. ATF in India is priced, on average, about 60% higher than international prices . Domestic carriers pay up to 50% more for fuel than those in Dubai or Singapore. Shares of Jet Airways fell 2.04% to close at Rs 576.05 on the Bombay Stock Exchange while InterGlobe Aviation Ltd fell 3.78% to Rs 1020.70.