For the past five months, aviation turbine fuel (ATF) prices have seen month-on-month dip, except for a slight rise in January and March.
BANGALORE: Soaring international crude prices may compel airlines to hike the fuel surcharge or embed the burden into basic fares.
For the past five months, aviation turbine fuel (ATF) prices have seen month-on-month dip, except for a slight rise in January and March. This had helped airlines to improve yields as they kept their surcharge constant at Rs 700 per ticket.
The trend of tumbling jet fuel prices now seem to be reversing with international crude prices galloping. March prices climbed by over 1.5% and as global prices reached a six-month high, surging above $66 a barrel (on Friday), it looks like April may also see a sharp rise in ATF prices.
It’s a bit early, but airlines are preparing to shield themselves against any rise in ATF prices beyond the tolerance level.
According to Capt G R Gopinath, managing director, Air Deccan, the resistance would break only at another 10% jump in the current ATF prices (which was Rs 34,618.56 per kilolitre in Delhi and Rs 35,740.85 in Mumbai in March).
“On a jump of 10% rise in jet fuel prices, there would be an increase of 4% in fares. This may not necessarily be through fuel surcharge hike, we may just increase our basic fare,” he said.
SpiceJet Ltd’s CEO and chairman Siddhanta Sharma would not look at tinkering with fuel surcharge on any climb in the ATF prices below 3-4%.
IndiGo is also keeping a close watch on the ATF price movement, but hasn’t taken a call on the revision of the fuel charge.
“We constantly monitor jet fuel prices, and it is likely they will rise a bit next month, but we have not made any decisions about the changes to the fuel surcharge to date,” said IndiGo CEO and president Bruce Ashby.
For the moment, airlines like IndiGo can afford to put off the decision. At least till the fuel prices do not cross Rs 43,989.91 per kl (in Delhi) and Rs 45,529.95 per kl (in Mumbai), which were the highest levels last year when crude prices was ruling at $78.40 per barrel.
“Since fuel constitutes the highest (40%) component of an airline’s operational cost, any swing in its price affects their bottomline immediately. If the current trend of soaring ATF prices persists, then airlines will not be able to avoid fare hike” said an analyst.
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