Jet fuel prices rise 5% to touch record high; air fares set to increase
PremiumRising ATF prices continue to dampen industry earnings, with prices in May 2022 being higher by 89.2% y-o-y
NEW DELHI : Prices of aviation turbine fuel (ATF) touched new highs on Friday. The price of ATF increased by 5.29% to ₹1,23,039.71 per kilolitre in the national capital. On 2 May, it was raised to ₹1,16,851.46 per kilolitre.
Airline fares, which are already high, are likely to increase further with the latest hike as ATF prices account for a large part of the operating costs of an airline.
“If we look at current domestic airfares versus what they were in January, the fares are up by 30-40% on average on most sectors . Compared to same period last year, airfares on some popular routes have gone up by more than 50%," said Aloke Bajpai, group chief executive officer and co-founder, Ixigo.
Over the next six months, he said, a lot would depend upon the outcome of the Russia-Ukraine crisis and if there is a resolution on the table to bring oil prices down. “Travel demand remains muted compared to where the industry expected it to be because of high airfares," he said.
Rising ATF prices continue to dampen industry earnings, with prices in May 2022 being higher by 89.2% on a year-on-year (y-o-y) basis, said a recent report by Icra.
Since the Russia-Ukraine war broke out in February, the oil market became more volatile and crude prices reached multi-year highs, before easing to some extent.
Oil prices eased on Monday as traders booked profits. At the time of writing the article, the July contract of Brent on the Intercontinental Exchange was trading at $111.00 per barrel, lower by 0.49% from its previous close. The June contract of West Texas Intermediate on the NYMEX fell 0.3% to $110.16 per barrel.
Prices are likely to be elevated, analysts said. “China’s industrial production and retail sales data released today (Monday) showed signs of increasing pressure on the economy amid zero tolerance covid policy," said Ravindra Rao, head of commodity research, Kotak Securities.
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On Monday, China reported a drop in retail sales and industrial production in April. Retail sales declined 11.1% in April from the year-ago period and industrial production dropped by 2.9% in April on a y-o-y basis. The economic slowdown in China is a major concern for the oil market as the country is a one of the largest importers of the commodity.
Despite the volatility in the oil market, retail prices of petrol and diesel in India continued to remain unchanged. In Delhi, petrol is sold for ₹105.41 per litre, while diesel is priced at ₹96.67 a litre.Retail transport fuel prices, which directly affect the common man, have been unchanged for around 40 days after increasing by ₹10 per litre during March 22-April 6 on the back of soaring oil prices amid the Russia-Ukraine conflict.