Jet fuel price hiked 5.4%

State-oil marketing companies hiked jet fuel price by 5.4% to Rs 49,287 per kilolitre from Thursday midnight, the fourth straight price hike in as many months.

Jet fuel price is now up 23.5% since January and coupled with weakened rupee, the move will pinch airlines. A modest hike in fares is now likely, said a source in a low-cost airline. Airlines have so far avoided increasing fares in view of increased capacity in the market. Also July-September is an off season for travel, but post the latest hike carriers are reviewing their fares.

An Air India spokesperson termed the latest price revision as unreasonable as petrol and diesel prices have been cut, reflecting a decrease in crude oil price. "The price hike will increase our monthly fuel bill by Rs 21 crore," said an Air India spokesperson.

 

An Indian Oil spokesperson justified the hike and said the price revision is in line with international benchmark rates for the Gulf region.

IndiGo and SpiceJet did not respond to query while a Vistara spokesperson said: "Fares in the airline industry are not simply a function of input costs alone. Competition, price sensitivity of customers, and demand supply balance are also significant drivers of airfare."

"Demand is slow during the season and I expect the airlines to absorb the costs," said Sharat Dhall, president of Yatra.com

While jet fuel price is up on a year-to-date basis, the price is still 3.8% lower on a year-on-year basis. In the March quarter, Jet spent 19% of its revenue on fuel, down from 26% a year earlier; IndiGo spent 25%, from 31% earlier. The lower fuel costs have enabled the airlines to keep the fares low. Fares are lower 15-20% on a year-on-year basis and tickets for immediate and next day travel too are cheaper compared to last year.

The rupee, however, has depreciated 5.45% against the US dollar over the last twelve months, increasing non-fuel costs for airlines.