Home / News / India /  Hike in jet fuel price may strain finances at domestic airlines
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Jet fuel prices climbed to a record high on Friday, a move that will strain airline finances despite a strong recovery in air passenger traffic in March. Also on Friday, oil marketing companies (OMCs) hiked the price of 19 kg commercial LPG cylinders by around 250 with immediate effect. The price hikes come on the back of an increase in global energy prices amid the Ukraine crisis and supply concerns, with Brent crude trading at $105 on Friday, up 65% on an annual basis.

The hike in aviation turbine fuel (ATF) on Friday was the seventh in 2022. In New Delhi, ATF price rose a record 20.74% from a month ago to 1,12,924.83 per kilolitre. Prices in Kolkata, Mumbai, and Chennai rose to 1,17,353.71, 1,11,690.61 and 116,583.71 per kilolitre, respectively.

Jet fuel prices are revised every fortnight and differ across states because of varying value-added taxes. Jet fuel makes up 30–40% of the cost of running an airline in India and the price hike will crimp profit margins of airlines that have reported huge losses over the last few quarters as a fallout of the pandemic. Airlines have been pressing the government to bring jet fuel under the ambit of the goods and services tax as it will give airlines the benefit of input tax credit.“The high taxes on jet fuel will need to be relooked," a senior airline official said, requesting anonymity.

Airlines may find it difficult to pass on the entire cost hike to passengers without impacting demand, the official said, adding that the positive is that so far, the market has not crashed despite high airfares.

However, domestic traffic is seeing a surge in recent weeks, with a decline in active cases of covid.

According to data compiled by the aviation website NetworkThoughts, 10.26 million passengers flew on domestic flights during March, up 34.31% over February. Total flights deployed by airlines during March were 37.39% higher than during February.

Coming to commercial LPG cylinder price hike, a 19 kg commercial cylinder now costs 2,253 in Delhi against the previous level of 2,003.50. In Mumbai, the price was hiked to 2,205 from 1,954.50 per cylinder.

Further, Indraprastha Gas Ltd on Friday increased the prices of compressed natural gas in Delhi by 80 paise to 60.81 per kg and the prices of piped cooking gas by a steep 5 per cubic metre.

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