Jet fuel prices hiked, air fares to skyrocket soon

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New Delhi: In a huge "shock" for airlines and the aviation industry that may see domestic airfares sky rocket by as much as 50 per cent in the next few weeks, state-owned oil firms have hiked the price of Aviation Turbine Fuel (ATF) to an all-time high due to soaring prices of crude oil globally.
The price of ATF has been hiked steeply by about seven percent. That works out to nearly Rs 5,000 from Rs 70,203 to Rs 75,031 per kilolitre in Delhi. Airlines are expected to immediately begin the process of evaluation of impact of the ATF hikes on operating costs. Both domestic and international airfares are expected to rise substantially now which will be bad news for passengers.
"The steep hike in ATF prices is a huge shock for airlines. Airfares are now expected to skyrocket due to a combination of factors such as the ATF price hike and the forthcoming festival season. The domestic airfares could now increase by as much as 50 percent," said well-known travel agent Rajji Rai who is also vice-president of the Universal Federation of Travel Agents Association (UFTAA).
"With this huge ATF hike, the domestic and international airfares are bound to rise substantially to neutralise the impact of the ATF hike. Airlines will have no option but to pass on the burden to the passenger," said a functionary of a private airline on condition of anonymity.
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Top Civil Aviation Ministry sources said hike in ATF prices would definitely have an adverse impact on the aviation industry. The steep ATF hike could mean the end of a respite for passengers who were enjoying discounts offered on domestic airfares by airlines.
With the Dussehra and Diwali festivals approaching within the next few weeks, passenger traffic is expected to increase. Airfares usually shoot up at this time every year as demand peaks. But the hike in fares could be all the more steep since the effect of the festival season will be accompanied by high ATF prices. Incidentally, ATF accounts for about 45 percent of the operating costs for airlines.
Airlines have already been hit by the falling value of the rupee vis-à-vis the US dollar and the steep ATF hike will now come as a double whammy. A weaker rupee will mean higher expenditure on payment to expat pilots, lease rentals of aircraft, maintenance, repair and overhaul of aircraft abroad, and external commercial borrowing.
Just recently, the Government had informed Parliament that the "airline industry in India suffers from huge debt burden close to US$ 20 billion" as per 2011-12 estimates.