Air passengers should expect an increase in airfares in the coming festive season!
According to the data presented by Indian Oil Corporation, prices of Aviation Turbine Fuel(ATF) increased at an all-time high on Monday. It has never been this high since March 2014.
Jet fuel prices as on October 1, 2018, surged to Rs 74,567 per kilolitre in Delhi, Rs 79,736 per kilolitre in Kolkata, Rs 74,177 per kilolitre in Mumbai and Rs 75,521 per kilolitre in Chennai. Jet fuel prices have been the highest in Kolkata and lowest in Mumbai.
The main reasons behind the surge in fuel prices is the increase in crude oil prices in the international market and falling rupee against US dollar.
Also, the government hiked import duty or tax on ATF to 5%, but the import duty hike is expected to have a marginal effect on the airline’s cost. This is because the amount of jet fuel imported by the airlines accounts to only 4 % of their total cost.
Owing to the stiff competition in the domestic aviation sector, airlines are propelled to keep the rates intact even on increasing jet fuel prices and falling rupee.
But, now the airlines, which are facing huge losses, are expected to pass on the burden of increasing jet fuel prices to consumers.
The domestic airlines are under tremendous pressure to curb expenses as the earning has gone down drastically.
Jet Airways had reported a quarterly loss of Rs 13.23 billion, while IndiGo, the country’s largest airline, in July, reported its lowest quarterly profit in three years, with earnings down 97 percent due to rising fuel costs and foreign exchange losses.
The airlines hope that airfares would increase in the month of October, citing festive season ahead and a surge in demand.