2 min read.Updated: 04 Oct 2021, 12:23 AM ISTRhik Kundu
The rising prices of ATF or jet fuel, which accounts for about 30-40% of total expenses for major domestic airlines, will hurt the bottom line of airlines that have reported huge losses during the last few quarters due to the covid-19 pandemic
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NEW DELHI :
Oil marketing companies (OMCs) have hiked prices of aviation turbine fuel (ATF) by about 9% over last month, and over 80% in the last year, as global crude oil prices firmed up on improved demand.
The rising prices of ATF or jet fuel, which accounts for about 30-40% of total expenses for major domestic airlines, will hurt the bottom line of airlines that have reported huge losses during the last few quarters due to the covid-19 pandemic.
ATF prices, currently, stand at ₹72,582.16 per kl (kiloliter) in New Delhi, up from ₹66,527 per kl a month ago according to Indian Oil Corp. Ltd (IOCL). ATF prices in Mumbai stand at ₹70,880.33 per kl, in Chennai, it was at ₹74,562.59 per kl and in Kolkata, it was at ₹76,590.86 per kl.
The prices of ATF are revised every fortnight.
Meanwhile, global Brent crude prices have risen by over 90% during the last year.
Until February 2021, ATF prices remained lower than the year-ago period, but prices have been rising since then, said Kinjal Shah, vice president of rating agency ICRA in a recent report. ATF prices in March, April, May, June, July, and August were higher by 3.0%, 59.8%, 103.4%, 86.3%, 59.7%, 55.3%, respectively, on a year-on-year (y-o-y) basis, Shah said.
In September, the prices were higher by 54.6% on a y-o-y basis, attributed to the low base of September 2020 when the prices declined 32.2% y-o-y as an impact of the pandemic, Shah added.
With the rising ATF prices, analysts estimate Indian airlines to remain largely loss-making during the coming quarters.
“With daily traffic at about 250,000 levels, crude at $75 per barrel, no major supply cuts by any airline and a long road to recovery for the international segment, profits remain distant," said ICICI Securities in a recent report. “However, higher-flying capacity and seasonally strong Q3 (October-December 2021 period) should help limit losses," it added.
Spokespersons of airlines like IndiGo, SpiceJet Limited, GoFirst, Vistara and AirAsia India didn't offer comments.
A senior airline official said that while the government's latest move to increase the capacity cap on domestic airlines to 85% of pre-covid levels will help airlines to operate more capacity, and cater to increasing demand during the festive season, rising jet fuel prices will be an additional burden to the bottom line as carriers operate more flights.
"I think, at one point, the rising fuel costs will have to be passed to the passengers," the official added, requesting anonymity.
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