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Explained: What impact will the 2% hike in ATF prices have on airfares?

Ahead of the summer travel season, ATF prices have been hiked by 2 per cent to record levels. Why the hike? What impact will this have on airfares? How many times have ATF prices been revised this year?

Written by Pranav Mukul , Edited by Explained Desk | New Delhi |
Updated: April 2, 2022 9:45:12 am
An IndiGo flight lands at Cochin International Airport. (Express Photo: Nirmal Harindran, File)

In the seventh consecutive hike, state-owned oil retailers Friday revised the prices of Aviation Turbine Fuel (ATF) by 2 per cent. The jet fuel will now cost Rs 1,12,924.83 per kilolitre in Delhi. The rise in prices to record levels is expected to have a direct impact on airfares as the summer travel season approaches.

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Why have jet fuel prices been hiked?

Jet fuel prices are revised on the 1st and 16th of every month based on the average international price of benchmark fuel in the preceding fortnight. Last month, international crude oil prices had climbed to a 14-year high of $140 a barrel and have since cooled off but stay elevated above $100 a barrel.

On March 16, the prices saw a sharp upward revision to Rs 1,10,666.29 per kilolitre, 18 per cent higher than the previous rate. That was the first time ATF prices crossed the Rs 1 lakh a kilolitre mark.

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What impact is it expected to have on airfares?

Aviation turbine fuel makes up for almost half of the cost for airlines. Sector experts say that the increase in ATF prices could translate into higher airfares ahead of the summer vacation season, which is the peak travel period during a year.

Notably, domestic airfares are still governed by government-mandated price ceilings and floors. Over the last month, airfares on some domestic routes have already been increased by 10-30 per cent compared to the year ago period.

How many times have ATF prices been revised this year?

Jet fuel prices have been increased by state-owned oil marketing companies every fortnight since the the beginning of 2022, and in seven hikes starting January 1, ATF prices have been increased by Rs 38,902.42 per kilolitre.

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