Air fares to rise as ATF prices touch all-time high

Air fares across the board are expected to rise during the peak travel period beginning next month after oil companies on Monday hiked aviation turbine fuel (ATF) prices by a steep 7 per cent, to an all-time high.

Effective 1 September, ATF price in Delhi will go up by Rs4,827.94  (or 6.87 per cent) per kilolitre (kl) to Rs75,031.09 per kl, state-run fuel retailer Indian Oil Corp said.

Aviation turbine fuel (ATF), or jet fuel, which is the single-largest component of an airline's operating cost, will now cost  Rs75,031 per kilo-litre in Delhi, Rs77,632.4 per kl in Mumbai and the highest Rs85,645 per kl in Kolkata.

Jet fuel constitutes over 40 per cent of an airline's operating costs.

ATF prices were increased by Rs3,617.84 per kl or 5.8 per cent on 1 July and by another Rs4,169.4 per kl, or 6.3 per cent on 1 August.

Earlier on 1 June, ATF prices had been raised to Rs62,416.16 per kl  from Rs62,649.95 previously.

These hikes follow two steep reductions in rates - by 5.5 per cent (Rs3,884.98 per kl) on 1 April and by 5.3 per cent (Rs3,545.94 per kl) on 1 May.

The fare hikes this time are expected to be the steepest, considering that the July-September period is the leanest travel season of the year, with airlines selling tickets at the lowest rates to fill up seats.

Spot fares in the October-mid January season, which are usually the highest, are expected to go up by more than 50 per cent this time, according to airline sources.

ATF prices have gone up by 22 per cent between July and September, raising the overall cost of airline operations by 20 per cent, according to airline officials.

Airlines are now finding it difficult to fend-off the combined effect of fuel price hike and rupee depreciation on operational expenses.

The current spot fares for the Delhi-Mumbai and Delhi-Bangalore routes are Rs6,000 and Rs6,500 against the early July rates of about Rs9,000 and Rs9,800, respectively. Peak air fares on these routes are expected to cross the Rs10,000-mark this time around.

The aviation ministry, meanwhile, has called a meeting of state ministers next week to discuss the issue of reducing sales tax on ATF. Prices at different airports vary because of difference in local sales tax or VAT.

Meanwhile, the government is expected to hike the prices of diesel by Rs3-5 per litre, LPG by Rs50 per cylinder and kerosene by Rs2 per litre after the ongoing Parliament session ends on 6 September.