Just when it seemed that things got up, the Indian aviation industry ran once again with turbulence with the OMICRON variant epidemic of COVID-19 hitting demand and oil marketing companies increase Also the price of air turbine fuel (ATF), the most important cost component for airlines
Petroleum marketing companies increased ATF prices of about 3% this month after two cuts of price in December. The ATF price culminated at 80,835.04 RS by KL in mid-November before its reduction of December 1 and 15 of 6 812.25 rupees by KL or 8.4%. The rise is likely to hurt the airlines that rising costs will increase to their misfortunes at a time when they have trouble filling out seats.
“The rise in the ATF price is a huge obstacle to the rebirth of the sector. Especially at the moment when demand already took a background because of the increase in the concerns of a third wave. The airlines will have no options but to transmit costs for passengers, “said MoneyControl responsible for the airline.
However, market experts stated that it would always be difficult for airlines to achieve increased operating costs for passengers because of the competition and fear of losing a market share.
Why do ATF prices increase?
Jet fuel prices are revised the 1st and 16 of each month on the basis of the average price of the international reference during the fifteen-day fifteen. The increase in rates reflects an increase in international crude oil prices over the last 15 days.
Crude oil prices were on the rise because the Omicron variant again forced countries around the world to adopt restrictions to contain its spread.
ATF prices in India have yo-yoed over the last few months with oil marketing companies with increases of 13.8% of October, before the two December reductions.
Compared with the same period of last year, ATF prices are still 91% higher, the data from the websites of oil marketing companies.
How will the ATF price allocate airlines?
“The fuel of the aviation turbine accounts for about 35 to 50% of the total operating costs of airlines. With the airlines already operating a lower passenger charge factor compared to pre-covidation levels, the new price increase stress the airline finances, “said an analyst during a consultation on national aviation .
The increase in ATF prices will not only have the impact of the airline capacity to offer reductions to passengers to maintain the demand for the fall, but will also affect their profitability at a time when The industry is already struggling to maintain costs.
“Airlines in India spend 40% 50% on ATF prices compared to international airlines. As international operations are closed, airlines do not even have the opportunity to buy ATF at a cheaper rate from abroad, “said another senior official of a national airline.
The increase in ATF not only affects the line of national airlines during the January-March quarter, but it will also limit the capacity of airlines to operate additional flights to reduce costs, said that Several market experts.
“Some airlines can even try to reduce flights a week to reduce expenses until air passenger traffic is starting to increase again. This becomes a situation of chickens and eggs when the airlines must choose between profitability and offer discounts to fill more seats, “said Lokesh Sharma, senior aviation analyst.