Aviation turbine fuel (ATF) prices were hiked by 5% to ₹1,23,039.71 per kilolitre in the national capital, according to a price notification issued by state-run oil marketing companies.

The hike in ATF prices is likely to make air travel more expensive as jet fuel constitutes around 40% of the running cost of an airline.

This is the tenth consecutive hike in aviation fuel prices, which have increased every fortnight since the start of the calendar year 2022.

Jet fuel prices are changed twice every month, based on the average price of the international benchmark in the preceding fortnight.

Among metros, ATF prices were the costliest in Kolkata at ₹1,27,854.60 per kl. Aircraft fuel was retailing at ₹1,21,847.11 per kl in Mumbai while in Chennai it stood at ₹1,27,286.13 per kl.

ATF prices were raised by 8.5% on the day of the Union Budget 2022-23 and then again on February 17 by 5.2%. Aviation fuel prices were increased by 3.3% on March 1 and later that month they witnessed the steepest jump of 18% on March 16.

Subsequently, jet fuel prices were raised by 2% on April 1 and by 0.2% on April 16. On May 1, ATF prices were hiked by 3.22%.

This comes at a time when Brent crude – the international benchmark - continued to soar above $100 a barrel amid the ongoing Russia-Ukraine war.

High crude prices are a negative for India, which imports around 86% of its annual crude oil requirement. Another trouble is the weakening rupee against the dollar, which is expected to increase the cost of the country's crude purchase.

The sharp rise in aviation fuel prices poses a serious threat to the nascent recovery seen by Indian airlines recently.

India's domestic air passenger traffic grew 83% year-on-year to around 1.05 crore in April 2022, which is about 5% lower than the pre-Covid-19 levels of April 2019, according to rating agency ICRA.

The airlines' capacity deployment last month was around 36% higher than April 2021, ICRA says, adding that capacity deployment in April has almost reached the pre-Covid-19 levels.

With the resumption of scheduled international operations from March 27, 2022, the international passenger traffic for Indian carriers in April 2022 surged to an estimated 18.5 lakh, marginally surpassing the international passenger traffic of around 18.3 lakh in April 2019.

ICRA warned the rising aviation turbine fuel (ATF) prices continue to dampen the industry earnings, with prices in May 2022 being higher by 89.2% on a year-on-year basis.

The rating agency continues to maintain a "negative" outlook on the Indian aviation industry, reflecting its view that the financial performance of Indian airlines is likely to remain under pressure in the near term as recovery in domestic passenger traffic to pre-Covid-19 levels is likely only by FY24.

Escalating ATF prices will continue to pose a major threat to the profitability of the airlines in the near term, it adds.

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