Flight tickets to get expensive during festive season as ATF prices rise

Last month, ATF prices increased by 8.4 per cent, or Rs 7,651, in the national capital to Rs 98,508 per KL compared to July

Air travel may get expensive during the upcoming festival season, as the price of aviation turbine fuel (ATF) surged 14 per cent month-on-month (M-o-M) to touch Rs 1.12 lakh per kilolitre (KL).

The ATF prices have now increased to the highest level since December 2022.

This was also the third consecutive increase in the price of jet fuel.

On a year-on-year (Y-o-Y) basis, jet fuel prices have narrowed by 7 per cent from Rs 1.21 lakh/KL during last September.

“Typically, in an airline's pricing mechanism, about 40 per cent of the eventual ticket price is attributed to the ATF price,” said Jagannarayan Padmanabhan, senior director -- consulting, CRISIL Market Intelligence and Analytics.

 

Analysts expect air fares to go up during the upcoming festival season.

“September is a lean month and to an extent it would be a lean month till mid-October, before the holiday season (which includes) Diwali and other (festivals) start kicking in. So, (for) the airlines to pass on the increase (in ATF prices) immediately will be a challenge. Maybe at the time of the festival season, they may be able to claw back some of this by a price hike in the tickets (then),” Padmanabhan added.

The airlines have to strategise the structure of their ticket pricing as jet fuel prices experience fluctuations from time to time.

ATF prices are revised on the first day of every month on the basis of the average international price in the previous month by state-owned Indian Oil Corporation (IOC), Bharat Petroleum Corporation (BPCL) and Hindustan Petroleum Corporation (HPCL).