The price of aviation fuel increased by 2%; Air fares are expected to rise


The price of Aviation Turbine Fuel (ATF) has been increased by 2% or Rs 2,258.54 per kiloliter to a record high of Rs 1,12,924.83 per kiloliter in the nation’s capital. While prices in Kolkata, Mumbai and Chennai increased to Rs 1,17,353.71, Rs. 1,11,690.61 and Rs. 116,583.71 per kilolitre, respectively. This is the seventh increase since January 2022 amid soaring global energy prices.

ATF prices are revised every 1st and 16th of the month and differ from state to state due to variations in value added taxes. The recent rise comes after the highest ever rise of 18.3% (17,135.63 rupees per kilolitre) on March 16. Some airlines then indicated an increase in airfares.

The cause of the rise is the continued rise in global energy prices amid the Ukraine crisis and supply issues. Brent crude was trading at $105 on Friday, which is up 65% on an annual basis.

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Airlines have urged the government to subject kerosene to the goods and services tax as this will provide airlines with relief and the benefit of the input tax credit. “The high taxes on kerosene will have to be rethought,” a senior airline official told Livemint, on condition of anonymity.

However, airlines may struggle to pass the full cost of the hike on to passengers without affecting demand. The positive is that so far the market has not seen a major impact despite the high airfares, the official added.

Jet fuel accounts for 30-40% of an airline’s operating cost in India and these price hikes will further erode the profit margins of airlines which have already suffered huge losses in recent quarters during the pandemic.

However, domestic air traffic is seeing a surge in demand in recent weeks with a decline in active Covid cases in the country.

First post: STI


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