Jet fuel price hike may impact fares

State-run oil companies in India have raised the prices of aviation turbine fuel (ATF) by 10 per cent, which comes to Rs 2,750 a kilolitre on an average.  This is the third time since September 2008 that oil companies have raised the prices of ATF – after raising prices by 3.3% on January 16, 2009, and then again raising them about two weeks ago by Rs 158 a kilolitre.

Now, aviation turbine fuel will cost Rs 29,926 a kilolitre in Delhi and Rs 30,785 a kilolitre in Mumbai. In Calcutta, the price of aviation turbine fuel will go up to Rs 37,744 a kilolitre from Rs 34,996.08 a kilolitre.

These prices, however, are still lower than the prices of Rs 71,028 in Delhi and Rs 73,674 in Mumbai, which prevailed in August 2008, after prices of crude oil touched a record $147 a barrel in the international market.

The price of ATF, which had gone up five times successively since March 2008, had reached an all-time high in August 2008 and then started falling by the end of 2008.

Airlines based in India had raised fares after each time the fuel price went up, but had not passed on benefits to passengers.

This was in spite of the Ministry of Aviation getting the airlines big benefits from the Ministry Oil and the Airports Authority of India regarding payment of dues.

Hence, according to aviation analysts, these airlines would find it hard to hike fares following the latest increase in the prices of ATF by 10 per cent.

Times of India has quoted an airline official as saying that, because of poor passenger load factor, airlines have been offering promotional fares and have reduced fuel surcharges.

Airlines based in India, the official added, were expected to suffer a collective loss of around Rs 10,000 crore in 2008-09 and that domestic airlines were likely to cut their flights once again.

According to media reports, the Air India-Indian Airlines combine has emphatically ruled out any increase in fares after the ATF prices were raised on March 31, 2009.

A spokesman of Air India was quoted as saying that Air India’s low fares would continue since airlines have been “compelled again to offer special schemes in order to attract passengers.”

Private airlines such as Jet Airways and Kingfisher Airlines have announced that they would appraise the impact of the latest hike in ATF prices and then decide on the fares, reports said.