ATF prices to come down by 2% on global declining trend

After being increased 14 consecutive times over the last seven months, prices of aviation turbine fuel, or ATF, are set to dip by two per cent, or around Rs 1,200 per kilolitre, later this week, in tune with a decline in import parity prices. The move is expected to bring marginal relief to cash-strapped domestic airlines.

Oil marketing companies (OMCs) like Indian Oil, Bharat Petroleum, Hindustan Petroleum and Essar Oil are looking to cut prices around May 15 in tune with the declining global prices. The ATF price has jumped 50 per cent since October last year to Rs 60,560 per kilolitre (for Delhi).

Unlike diesel, kerosene and domestic LPG, ATF is a decontrolled product and OMCs can change its price on their own on a fortnightly basis. “The global trend for the current fortnight is a declining one. The OMCs will make a cut in ATF prices,” said an industry executive.

The rise in ATF prices, which constitute about 40 per cent of an airline’s operating cost, has been exerting continuous pressure on cash-strapped domestic carriers. In the case of low-cost carriers such as IndiGo and SpiceJet, the impact is more severe as the share of ATF in the total operating cost has gone up to 50 per cent. As a result of rising losses, most airline companies have not been able to make timely payments for ATF to the OMCs.

Most airlines have raised fuel surcharge by two-three times since November to partly offset the impact of the rising ATF. The airlines have raised average fares by around 15 per cent. However, they continue to remain under pressure.

From touching a 34-month high of $121.90 a barrel on April 28, the Indian basket of crude oil has slipped over seven per cent to $113.09 on May 11. For the current month so far, the basket has averaged $113.24 a barrel compared to $118.46 a barrel in April. The Indian basket represents published freight on board prices of average of Oman/Dubai crude for sour grade and Brent for sweet grade in the ratio of 67.6:32.4.