Aviation turbine fuel (ATF), commonly known as jet fuel, saw an increase of approximately 8.5% in prices in India on Monday, following a significant surge in global crude oil prices due to the ongoing conflict in West Asia.
Although such price hikes typically lead to higher airfares, the government has taken steps to minimize the immediate impact on domestic travelers. Initial reports from Indian Oil Corporation suggested a more substantial spike, with ATF prices surpassing Rs 2.07 lakh per kilolitre, raising concerns about a potential sharp rise in ticket costs. However, the government clarified that this surge would not affect domestic operations.
ATF is a deregulated product, and its prices are adjusted based on international benchmarks, as stated by the Ministry of Petroleum and Natural Gas. Due to the sharp increase in global crude oil prices, a significant rise in jet fuel rates was anticipated from April 1. Nevertheless, oil marketing companies, in coordination with the Ministry of Civil Aviation, have implemented a partial and gradual increase for domestic scheduled flights.
The effective increase for domestic airlines amounts to around Rs 21 per liter, representing a roughly 25% rise from the base price. Conversely, international flights and domestic non-scheduled operations are facing a much steeper hike of approximately Rs 110 per liter, reflecting the full impact of global fuel prices and expected future cost levels.
This adjustment aims to prevent a sudden surge in domestic airfares amidst ongoing volatility in global energy markets. The surge in ATF prices is driven by heightened crude oil rates amid geopolitical tensions involving Iran, the United States, and Israel, coupled with concerns over disruptions in the Strait of Hormuz.
Currently, Brent crude is hovering around $105 per barrel, while WTI crude is above $102 per barrel. Data from the International Air Transport Association reveals that global jet fuel prices have nearly doubled within a month, highlighting the substantial increase.
ATF stands as one of the major cost components for airlines, constituting up to 40% of their operating expenses. Airlines are also grappling with extended flight paths due to airspace restrictions in parts of West Asia, leading to increased fuel consumption. The depreciation of the rupee has further intensified cost pressures, as fuel imports are priced in dollars.
Sources within oil marketing companies suggest that ATF prices could undergo further revisions in phases based on evolving circumstances. Presently, domestic passengers are anticipated to experience minimal immediate impact on fares due to the gradual increase, while international travelers might face higher ticket prices or additional fuel surcharges if crude prices remain elevated.