Flying Just Got Expensive: ATF Price Increase Explained

For those planning to fly, air travel might soon become more expensive as Indian oil companies have raised the prices of Aviation Turbine Fuel (ATF). This increase is expected to directly affect airlines’ operational costs and the price of flight tickets.

In this article, we will explore why the price of aviation fuel has gone up, how it will impact passengers, airlines, and investors, and what the future holds.

What’s Happening?

Recently, Indian oil companies raised the price of Aviation Turbine Fuel (ATF) by 1.45%, effective from December 1, 2024. This price hike is expected to make air travel costlier. ATF is the fuel used to operate aeroplanes, and it accounts for almost 40% of airlines’ operational costs. This increase will likely affect both passengers and airlines.

Amid fluctuations in international oil prices, Indian airlines are now facing this challenging situation.

Rising Aviation Fuel Prices

Oil companies have raised the price of ATF by 1.45%, bringing its cost to Rs 91,856.84 per kilolitre in Delhi. In Mumbai, the price is Rs 85,861.02 per kilolitre, while in Kolkata, it is Rs 94,551.63, and in Chennai Rs 95,231.49 per kiloliter. This is the second consecutive month of price hikes, with ATF prices rising by 3.3% in November.

In September and October, there were two price cuts for ATF, resulting in the lowest prices of the year. On October 1, ATF prices dropped by 6.3% (Rs 5,883 per kilolitre), and on September 1, they fell by 4.58% (Rs 4,495.5 per kilolitre). However, following these reductions, prices have once again increased in November and December, adding financial pressure on both airlines and passengers.

Impact on Domestic and Commercial LPG Prices

This price increase isn’t limited to aviation fuel alone. The price of commercial LPG cylinders has also risen by Rs 16.50, bringing the new price in Delhi to Rs 1,818.50. This marks the fifth consecutive month of price hikes, with a total increase of Rs 172.50 since August. These prices have now reached their highest levels of the year.

However, the price of the 14.2 kg LPG cylinder for domestic use has been kept steady at Rs 803. The rising cost of commercial LPG will put additional pressure on hotels, restaurants, and small businesses, which are already grappling with inflation.

What Does This Mean for Investors?

Government-owned oil companies like Bharat Petroleum (BPCL), Indian Oil Corporation (IOC), and Hindustan Petroleum (HPCL) revise the prices of aviation fuel and cooking gas at the beginning of each month based on international market trends. The recent price changes could impact stocks linked to oil companies and airlines.

Oil companies like Indian Oil and Bharat Petroleum may benefit from this price increase, as higher prices could improve their profits. On the other hand, airline companies such as Indigo and SpiceJet might face short-term financial pressures.

What’s Next?

The recent increase in ATF prices is a result of fluctuations in international crude oil prices and a decline in the rupee-dollar exchange rate. Since aviation fuel makes up about 40% of an airline’s total cost, any increase in its price directly impacts flight ticket prices.

If oil prices stabilise or decline in the future, airlines and passengers may see some relief. However, if the price of Brent crude continues to rise in the international market, passengers could face higher ticket prices, and airlines may experience a drop in profits.

This article is for informational purposes only. This is not investment advice. Disclaimer: Teji Mandi Disclaimer