It’s sky high: The effect of surging prices of jet fuel

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₹112,419.33 per kilolitre, marking a 14.12% increase from August’s ₹98,508.26. The same trend was observed in other major cities like Mumbai, Kolkata and Chennai. This recent surge in airline fuel prices is the highest seen since December 2022.

The combination of a weakening Indian rupee against the US dollar and the unpredictable international crude oil market serves as the primary driver of these increases. The impact of such an increase in price is felt more in India since states levy value-added tax (VAT) on ATF. Jet fuel prices have increased for the third consecutive month.

This fresh hike could mean a setback for the airline industry, which allocates 40-50% of its operating expenses to jet fuel. This increase couldn’t have come at a worse time—the industry is still recovering from the financial hardships inflicted by the covid-19 pandemic and the restrictions on mobility that followed. The post-pandemic recovery has been promising.

In July this year, domestic air traffic surged a remarkable 24.7% from a year ago, totalling 12 million passengers. However, the ATF price hike now threatens to disturb this momentum. Air cargo had been struggling to regain pre-pandemic levels, with just 3.14 million tonnes being carried in FY23 as compared to 3.5 mt in FY19.

Of the cargo carried in FY23, 1.30 mt was domestic and the rest international. Domestic cargo firms have protested unfavourable regulation and taxes on ATF, saying these make them uncompetitive against global carriers. Airlines pass on rising costs through higher airfares.

This third consecutive hike in ATF prices comes during the festive season, driving up fares on busy routes. Experts predict fares could go up by up to 10% during the festival period. In FY23,