ATF prices rise 9% in a month, over 80% in 1 yr

NEW DELHI: Oil marketing companies (OMCS) have raised prices of aviation turbine fuel (ATF) by about 9% in the past month and by more than 80% in the last one year, adding to the woes of Indian carriers seeking to emerge from the widespread disruptions caused by the pandemic.

Jet fuel makes up 30-40% of the cost of running an airline in India and any increase will hurt the profit margins of airlines.

Refiners have been raising jet fuel prices as global crude oil prices firmed up on improved demand. ATF prices are revised every fortnight.

ATF currently costs ₹72,582.16 per kiloliter (kl) at New Delhi, up from ₹66,527 per kilo litre a month ago, according to Indian Oil Corp. Ltd (IOCL). ATF in Mumbai costs ₹70,880.33 per kl, while in Chennai it costs ₹74,562.59 per kl and in Kolkata the cost is ₹76,590.86 per kl.

Brent crude prices have surged more than 90% in the last one year.

Until February 2021, ATF prices remained lower than the year-ago period, but prices have been rising since then, Kinjal Shah, vice president of rating agency Icra, said in a recent report.

ATF prices in March 2021, April 2021, May 2021, June 2021, July 2021 and August 2021 prices were higher by 3.0%, 59.8%, 103.4%, 86.3%, 59.7%, 55.3%, respectively, from the year earlier, Shah said.

“In September 2021, the prices were higher by 54.6% on a year-on-year (y-o-y) basis, attributed to the low base of September 2020, when the prices declined y-o-y by 32.2% because of the impact of the Covid-19 pandemic,” Shah added.

With rising ATF prices, analysts estimate Indian airlines to remain largely loss-making during the coming quarters.

“With daily traffic at about 250,000 levels, crude at $75 per barrel, no major supply cuts by any airline, and a long road to recovery for the international segment, profits continue to remain distant,” ICICI Securities said in a recent report.

“However, higher flying capacity and seasonally strong Q3 (October-december 2021 period) should help limit losses,” it added.

Spokespersons of major airlines such as Indigo, Spicejet Ltd, Gofirst, Vistara, and Airasia India declined to comment.