Jet fuel prices have recently been increased just as the aviation industry is trying to keep up with the rising air traffic. Will this hike take a toll on travellers' wallets
Domestic airfares have lately been on a turbulent ride as prices continue to take a volatile pathway, thanks to the rising air traffic. On Thursday, the government raised air fuel prices by over Rs 3,000/kl in Delhi, according to Indian Oil's website. This price hike has been imposed on other major cities as well, including Kolkata, Chennai and Mumbai.
However, this hike comes at a tough time for the aviation industry, which is already feeling the strain of global supply chain disruptions that have delayed fleet deliveries.
Just last week, the domestic budget carrier, Indigo, said in an earnings call that the increasing value-added tax (VAT) on aviation turbine fuel (ATF) can act as an inflationary catalyst for the aviation firm. What adds fuel to the fire is the soaring airport fees.
"Currently, we are experiencing a higher inflationary environment... it is across the board, we are experiencing. Nonetheless, we are looking at ways to control the costs," Indigo said in its port-earnings call, also suggesting that the rising fleet might help to counterbalance the surging expenses.
Meanwhile, nearly 13 airports across India, have increased their UDF (User development fees), which refers to the charges imposed by airports on airlines to fund the development, expansion and other broader infrastructure projects/upgrades.
All these factors combined are putting strain on India’s aviation sector and it’s likely that travellers might feel the pinch in their wallets.
In June month, Aviation Minister Kinjarapu Ram Mohan Naidu also highlighted the issue of rising air fares. “Since the time I have been announced as Civil Aviation Minister. Wherever I go, people have been mentioning that the prices have somehow increased over the last few years, especially after Covid. I need a thorough understanding of the issue, so, I am going to sit with the stakeholders,” he said.