Brace for higher airfares as jet fuel prices rise

SpiceJet has in the last few months tried to absorb as much burden of this fuel price rise, which constitutes more than 50% of our operational cost, as we could

Indian travellers will have to pay more to fly this year as record-high jet fuel prices and a weaker rupee force domestic carriers to hike airfares.

“The sharp increase in jet fuel prices and the depreciation of the rupee have left domestic airlines with little choice but to immediately raise fares and we believe that a minimum 10-15% increase in fares is required to ensure that cost of operations are better sustained,” SpiceJet Chairman and Managing Director Ajay Singh warned on Thursday.

The comments came as aviation turbine fuel (ATF) prices were steeply increased by nearly Rs 20,000 per kilolitre to Rs 1,41,232 per kilolitre.

Higher crude oil prices have forced oil marketing companies to raise the prices of ATF, which makes up for at least 40% of an airline’s operating cost. Since India largely banks on imports to meet its oil needs, the only way to reduce jet fuel prices is to cut taxes.

“This massive increase is not sustainable and governments, central and state, need to take urgent action to reduce taxes on ATF that are amongst the highest in the world,” Singh said, highlighting how aviation turbine fuel prices have risen by more than 120% since June 2021.

Aviation experts agreed.

“The government has been mooting the idea of bringing ATF under GST, and I believe these are the right conditions which make it necessary to bring ATF under GST,” Rohit Tomar, Managing Partner at Caladrius Aero Consulting LLP, told DH. “Aviation is an enabler of economy and jobs, and with the expected fluctuations in the ATF and the upcoming holiday season travel in India, it would be prudent to make a decision on the inclusion soon.”

The significant increase in fuel prices definitely posed a challenge to the recovery of the industry, A Vistara spokesperson had told DH last month, adding that while the recent cut in ATF taxes by several states and resumption of international flights had helped, “there is still a long way to go to make it more viable for airlines.”

Indigo did not immediately respond to a DH request seeking comment on Thursday.