ATF Price Hike: Major shock to air travellers. State-owned oil companies have increased the price of Aviation Turbine Fuel (ATF), or jet fuel, by approximately 10%. In addition, the government has also launched a new ATF Price Stabilization Scheme to provide relief to airlines, under which airlines can fix fuel prices for the next three years if they wish. This move aims to protect airlines from fluctuations in international crude oil prices.
ATF Price Hike
According to the new rates, the price of ATF in Delhi has increased to approximately Rs 115 per liter, compared to approximately Rs 104.93 per liter previously. This means airlines will now have to spend more per liter of fuel. ATF is considered the largest expense in the aviation industry and accounts for approximately 35% to 40% of an airline’s total operating costs. Therefore, the increase in fuel prices could directly impact airline costs and future airfares.
It’s worth noting that the government recently approved a Rs 10,000 crore ATF Price Stabilization Fund. Under this scheme, airlines will have the option to purchase fuel at a fixed price. If an airline joins this scheme, it won’t have to worry about sudden price increases in the market. This will allow airlines to better estimate their expenses and avoid imposing additional burdens on passengers.
As per the Ministry of Civil Aviation, the prices of ATF have experienced a significant surge in recent months, attributed to the ongoing tensions in West Asia and the instability in the global energy market. ATF prices, which were approximately Rs 60.50 per liter in March, escalated to an Import Parity Price of Rs 142 per liter by May. To tackle this uncertainty, the government has introduced a new model.
The government has set the FOB (Free on Board) price of ATF at Rs 86.32 per liter for domestic flights and Rs 104.49 per liter for international flights. After including taxes and additional charges, the selling price in Delhi is expected to be around Rs 115 per liter. In Mumbai, it will be approximately Rs 114.5 per liter, while in Chennai, it will be about Rs 139 per liter.
Experts suggest that this strategy could be advantageous for airlines in the long term. If international crude oil prices continue to rise, companies involved in this plan can mitigate substantial losses by acquiring fuel at the fixed rate. Conversely, if oil prices decrease, airlines will need to reconcile the market price with the fixed price.
