Record prices of fuel (ATF) have dealt a blow to the airlines trying to overcome the Corona crisis. After an 18 per cent hike in aviation fuel prices on Wednesday, companies are now preparing to increase fares by up to 15 per cent on major routes.
This is the sixth increase in aviation fuel since the beginning of this year, taking prices to Rs 1.10 lakh per kilolitre. After the recent turmoil in the international oil market, the price hike in jet fuel, influenced by oil marketing companies, crossed Rs 1 lakh per kiloliter for the first time. In fact, ATF prices have increased every fortnight since the beginning of this calendar year.
ATF prices have been increased by 36,643.88 kl, or nearly 50%, in six hikes starting January 1. Aviation experts say that in view of the costly fuel, airlines may request the civil aviation ministry to increase the cap on airfares imposed by the government in times of pandemic, which has fixed upper and lower limits on airfares.
IndiGo’s Chief Executive Officer (CEO) Ranjoy Dutta said the hike in the prices of aircraft fuel has badly affected the company. Dutta said that we are in talks with the government to bring ATF under GST as it gives the benefit of input tax credit. Experts say that bringing ATF under GST will bring relief to airlines as well as passengers.
ATF became costlier by 86% in one year
Aircraft fuel prices have increased by 86 per cent in one year. Prior to this, the record level of aviation fuel was recorded in August 2008 when the ATF price reached Rs 71,028.26 per kiloliter after crude oil prices went up to $147 a barrel. On the other hand, international oil prices hit a 14-year high of around $140 a barrel in early March this year on fears of supply disruptions following Russia’s invasion of Ukraine. Whereas in the last few days it has come down to around $ 100 per barrel.
This will affect the passengers
The prices are revised on 1st and 16th of every month based on the average international price of the benchmark fuel over the previous fortnight. As per the existing rules, airlines can increase the fare for travel after every 15 days of booking. This means that on select routes where demand flexibility is less, bookings for travel after a fortnight will make fares costlier. This will have a direct impact on the pockets of the passengers. Aviation industry officials said fares are expected to increase on the Delhi-Mumbai, Delhi-Bengaluru, Delhi-Chennai, Delhi-Hyderabad and Delhi-Kolkata routes. Among these routes too, the Delhi-Mumbai route is expected to witness the fastest growth. At present, the fare on the Delhi-Mumbai route is between Rs 2400-14,000.
Booking a month in advance will also be expensive
Aviation experts say that after many years it will be seen that even after booking the airfare a month in advance, it will be 30 to 40 percent costlier than AC2 of a train like Rajdhani. Whereas before this, airfare was 20 to 30 percent cheaper than AC2 of Rajdhani train if tickets were booked just 15 days in advance. Experts say that if the fares are expensive, the airlines will also increase the chances of losing customers. In such a situation, the road is not easy for the airlines in view of the current situation.