Aviation turbine fuel (ATF), the fuel used by commercial aircraft, has become costlier for domestic airlines for the second straight month.
Citing Indian Oil Corporation (IOC) sources, ATF prices have been increased by Rs 6.28 per litre, or 5.46 per cent, taking the rate from Rs 115 per litre to Rs 121.28 per litre, according to a report by NDTV Profit .
The increase comes amid a rise in global crude oil prices. Oil markets strengthened after fresh tensions between the United States and Iran heightened concerns about potential disruptions to energy supplies moving through the Strait of Hormuz, a key global shipping route for crude oil. Oil prices ended August slightly higher after a turbulent month marked by shifting geopolitical developments and continued uncertainty over efforts to resolve the conflict. Concerns also grew after Washington reiterated its intention to increase pressure on Iran’s economy.
Therefore, the industry may pass on the burden to customers by increasing air ticket rates. The hike follows a similar increase on August 1, when ATF prices were raised by about Rs 5 per litre from Rs 110 to Rs 115 per litre. Before that, fuel prices had been reduced by Rs 5 per litre in July. In India, aviation fuel typically accounts for 35 per cent to 40 per cent of an airline’s operating expenses, making any change in ATF rates a significant factor for the industry’s profitability. Consequently, US benchmark West Texas Intermediate (WTI) crude traded above $86 a barrel after gaining 2.8 per cent in the previous session on Monday, while Brent crude settled close to the $90-a-barrel mark.
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The latest revision is expected to increase operating costs for airlines, as fuel remains one of their biggest expenses. ticket prices are also influenced by factors such as passenger demand, competition among carriers and seat availability While higher fuel prices can eventually lead to an increase in airfares.
