Rising ATF prices expected to hurt aviation and travel rebound

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The sharp rise in air turbine fuel (ATF) prices is expected to impact the rebound in the aviation and travel industry as it will lead to higher fares, but not to the extent that it prevents airlines airlines to recover the cost of their operations. .

“Rising fuel prices and the depreciation of the rupee are expected to have a huge impact on the airline industry, especially at a time when the industry is trying to emerge from the Covid-19 crisis. It will be a period difficult for us to come, ”said an airline executive, who declined to be identified.

On Monday, oil companies raised ATF prices 13.9% from October prices to 82,638 yen per kiloliter in Delhi. With this increase, jet fuel prices are about 95.8% higher than in November 2020. Airlines say jet fuel prices account for up to 40% of the total cost of operations in India, one of the most raised to the world.

A travel industry observer said fares were already high due to increased demand for flights from leisure travelers as well as visits from friends and family, and that any further increase would have an impact on the rebound of the sector, which is among the most affected. by the pandemic.

“Fares are high and skyrocketing on routes at the request of leisure travelers. I don’t think the aviation and travel industries will ever revive with this type of structure, ”said Ajay Prakash, president of the Federation of Travel Agents of India (TAFI). “With this new ATF hike, prices will go up further and add to the overall impact of gasoline and diesel prices, I don’t see any recovery in the travel and tourism sectors.”

However, others said it would be difficult for airlines to pass increased operating costs on to passengers due to competition and expected losses to airlines.

“For airlines in India, even a small increase in fuel increases has a significant impact on profitability. Considering the competition, the sharp reduction in tariffs and the increase in capacity, I do not see a situation where all the increase in costs due to higher fuel prices can be passed on to consumers ” said Vinamra Logani, operations manager at Sarin & Co, a law firm specializing in aircraft leasing and financing.

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