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State oil marketing companies on Sunday, increased aviation turbine fuel prices by 6%, the third consecutive monthly price hike. The revision adds to the cost pressure already being borne by the carriers and could lead to rise in fares. A kilolitre of jet fuel will now cost Rs 53,045 in Delhi in October, up 6% from the September price.
On a year-to-date basis, jet fuel price is just around 1% higher but it is 13% higher on a year-on-year basis."The costs have gone up significantly so this will see an impact on pricing soon," said a senior executive of a private airline. So far no airline has notified an increase in fares. "The increase in crude oil prices and rupee depreciation has raised concerns regarding airlines' profits and a 1% change in rupee and crude would have an impact of around 4-5% and 3-4% on earnings (other things remaining same), " Santosh Hiredesai of SBICAP Securities wrote in an investor note. Brent crude price touched a two-year high of $58.6 per barrel earlier in the week. "If crude prices ($ 58/barrel) and rupee ( Rs 66/$) sustain at these levels airlines would need to hike passenger fares by 5-6% over last year to maintain unit profitability," Hiredesai said. Also, airlines that have seen a capacity moderation due to Airbus A320neo engine issues are better placed to pass on cost increase to customers while moving into a seasonally strong festive season.