Fuel levy likely to pull in nearly Rs 100 crore per week for IndiGo

Other airlines also expected to follow suit

IndiGo, India’s largest airline, expects to earn between Rs 90-100 crore per week from the fuel charge, which was introduced in ticket prices from October 6 due to the significant rise in aviation turbine fuel (ATF) prices, its executives said on Sunday.

ATF costs represent the largest expenditure for Indian carriers, consuming approximately 45 per cent of their overall revenue.

From June 1 to October 1, ATF prices have surged by 32.4 per cent, reaching Rs 1.18 lakh per kilolitre (KL) in Delhi. 

“We believe we will be able to earn about 7-8 per cent of our total revenues in Q3 (October-December) from the fuel charge, if it remains in effect until December,” one executive told Business Standard.

Another executive added the airline expects to earn “approximately Rs 90-100 crore per week” from the fuel charge.

IndiGo’s spokesperson did not respond to Business Standard’s request for a statement on this matter.

In the first quarter of this financial year, IndiGo, achieved a consolidated total income of Rs 17,161 crore and posted its highest-ever quarterly consolidated net profit at Rs 3,090.6 crore.

In the October-December period of last year, the company's total income and net profit stood at Rs 15,410 crore and Rs 1,423 crore, respectively.

From October 6, IndiGo imposed a fuel charge of Rs 300 for flights covering distances of 0-500 km, Rs 400 for flights spanning 501-1,000 km.

This type of graded increase was applied to all flight categories, with flights covering distances of 3,501 km and above, incurring a fuel charge of Rs 1,000.

According to the data provided by aviation analytics firm Cirium, IndiGo's flight distribution is as follows: 25.6 per cent of flights cover distances within the 0-500 km range (Mumbai-Ahmedabad, Kolkata-Guwahati), 32 per cent span distances in the 501-1,000 km category (Delhi-Goa, Hyderabad-Kolkata), and 22.2 per cent range from 1,001 to 1,500 km (Delhi-Dubai, Bengaluru-Chandigarh).

IndiGo operates an estimated 1,960 flights on a daily basis.

Some other airlines are also expected to follow IndiGo's suit and introduce fuel charges in their ticket prices.

The Indian aviation sector experiences its peak travel season between October and December, so the inclusion of a fuel charge component in airfares is anticipated to have a sizable impact on air passengers.

This is not the first time that IndiGo has introduced a fuel charge. In May 2018, the airline had introduced a similar fuel charge component in response to substantial increase in ATF prices.

This was later removed when the ATF prices went down.

ATF prices are revised on the first day of every month on the basis of average international price in the previous month by state-owned Indian Oil Corporation (IOC), Bharat Petroleum Corporation Ltd (BPCL) and Hindustan Petroleum Corporation Ltd (HPCL).