New Delhi: In what may exacerbate the poor financials of Indian airlines, jet fuel prices were hiked by ₹4,734.15 per kilolitre on Friday. The 8.15% increase in aviation turbine fuel (ATF) prices comes against the backdrop of airlines facing rising costs in international operations because of longer flight durations and disruptions in schedules as they have had to re-route their flights after Pakistan shut its airspace.
Fuel comprises the bulk of airlines’ costs and high fuel prices erode profits.
According to state-owned Indian Oil Corp. Ltd (IOC), which provides fuel to around 1,750 flights daily, the ATF price was ₹62,795.12 per kilolitre at Delhi starting 1 March. These prices have been the highest this year.
Interestingly, 2019 started on a good note with a lot of relief because of lower ATF prices, as crude oil prices were relatively lower then.
The Indian aviation sector has been going through a rough patch with Jet Airways (India) Ltd being cash-strapped, flight cancellations by IndiGo (InterGlobe Aviation Ltd) over reasons such as pilot shortage, issues with airport infrastructure, and a much- delayed revival plan to privatize Air India.
Any spike in international crude oil prices will impact Indian aviation against the backdrop of factors such as the Organization of the Petroleum Exporting Countries (Opec) and Russia cutting supplies, the US imposing sanctions on Venezuelan state-owned oil company Petróleos de Venezuela SA, and US President Donald Trump pulling the country out of a historic 2015 accord with energy-rich Iran.
The cost of the Indian basket of crude, which represents the average of Oman, Dubai, and Brent crude was $65.78 a barrel on 28 February, according to the Petroleum Planning and Analysis Cell.
This cost, which averaged $47.56 and $56.43 per barrel in FY17 and FY18, respectively, registered an average of $64.53 in February. International crude oil prices had reached a record high of $147 per barrel in July 2009.