State-run oil companies raised jet fuel prices for international airlines by 5.33% on Friday, the second increase since April 1, even as domestic airfares came under pressure from the cumulative impact of higher fuel costs and airspace disruption.
Aviation turbine fuel prices for international airlines were raised by $76.55 per kiloliter to $1,511.86 per Kuala Lumpur in Delhi, home to India’s busiest airport. There is no change in aviation turbo fuel (ATF) prices for domestic airlines.
On April 1, the government said it had set a domestic ATF increase of 25%. $1,04,927 per Kuala Lumpur, to protect passengers from severe price shock. International operations bore the full market-related increase.
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Earlier this week, the Indian Airlines Association, which represents Air India, IndiGo and SpiceJet, warned the civil aviation ministry against canceling flights in a letter saying the airlines were about to “cease operations”. The FIA has sought urgent intervention over what it called ATF ad hoc pricing that is making airline networks “unviable and unsustainable”.
Air India admitted that it had raised air ticket prices and imposed fuel surcharges to partially offset the rise in fuel costs, saying the price hike was affecting customer demand.
Data from the Directorate General of Civil Aviation (DGCA) showed that passenger load factors fell by 0.87% across airlines in March compared to February, indicating that demand is starting to ease.
Indian airlines are entering a difficult phase as rising international flight prices, rising fuel costs and weak external demand have put pressure on profitability, with the pressure likely to continue for at least two quarters, an industry insider said.
International capacity is estimated to be reduced by 20-25%, with routes between India and the UAE under particular pressure. Only selected high-demand routes to the UK and parts of Europe can absorb the higher operating costs. Domestic demand could support airlines until mid-June, after which the lean season and persistent fuel prices could lead to further capacity cuts and pressure on margins, said the source, who requested anonymity.
