The price of aviation turbine fuel has gone up 7.5 per cent in September, signalling hard times for domestic carriers. The Rs 1,500 per kilolitre increase in ATF prices over August is the sharpest yet in this financial year.
The price of ATF stands at Rs 21,400 a kilolitre in September, compared to Rs 19,900 a kilolitre in August.
Domestic airlines Air Sahara and Indian Airlines do not, however, plan to increase air fares. ATF costs account for 30 per cent of the operating expenses of domestic airlines.
Reacting to the hike, UK Bose, chief executive officer of Air Sahara said, "There have been minor hikes in ATF prices in this financial year, so this increase is unexpected and comes as a rude shock. We do not plan to hike fares, though."
Senior Indian Airlines officials added that a reciprocal hike in fares would prove detrimental, as this was not the peak season for domestic travel.
According to airline industry sources, the fuel bill for airlines will increase by Rs 75 crore (Rs 750 million) due to this hike, if it is assumed that the ATF price will remain at the same level for the rest of the year. Around 28-32 per cent of the fuel cost is factored into the airfare.
Sources said a 1 per cent increase in ATF prices result in an addition of Rs 10 crore (Rs 100 million) to the fuel bill.
The current financial year began with a 3.96 per cent dip in ATF prices compared to March, while May witnessed a significant 19.42 per cent drop, which took the price to Rs 19,500 per kilolitre. The hikes in July and August were a minor 1.03 per cent and 1.5 per cent, respectively.
ATF prices went up a significant 12 per cent in March 2003 to touch an all-time high of Rs 25,200 a kilolitre. This resulted in all the three domestic carriers hiking airfares by 15 per cent.
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