Your holiday just got more expensive! Why flyers will have to shell out more for air tickets

If you were planning for a holiday soon, chances are you going to have to shell out much more for your airplane ticket. Air travel in India just got more expensive due to an unabated rise in Aviation Turbine Fuel (ATF) or jet fuel and the depreciation of the rupee. So, how does the increase in price of ATF affect the cost of air tickets? How significant will the hike be? What happens to the aviation industry? We answer these questions and much more. Rise in ATF prices As per a notification of state-owned fuel retailers, the price of ATF was hiked by 16.3 per cent, to Rs Rs 1,41,232.87 per kl (Rs 141.2 per litre) in the national capital. ATF in Mumbai now costs Rs 1,40,092.74 per kl, while it is priced at Rs 1,46,322.23 in Kolkata and Rs 1,46,215.85 in Chennai. Rates differ from state to state, depending on the incidence of local taxation. The increase is in step with firming international oil rates. Brent - the world’s most popular crude oil benchmark — was on Thursday trading at $119.16 per barrel — the highest in almost a decade. ATF prices have doubled, rising 91 per cent in the six months of 2022. According to a report, ATF prices have increased every fortnight since the start of 2022. SpiceJet’s chairman and managing director Ajay Singh commenting on the rise, said, “The ATF prices have increased by more than 120 per cent since June 2021. This massive increase is not sustainable and governments, central and state, need to take urgent action to reduce taxes on ATF that are amongst the highest in the world.” The sharp increase in price is linked to global crude oil prices, which have risen steadily due to the Russia-Ukraine conflict. How do ATF prices affect airlines? The cost of ATF makes up 30-50 per cent of the cost of operations for airlines in India. A report by MoneyControl explained that higher fuel prices not only hit the bottom line of airlines, but also limits the airlines’ ability to operate extra flights. In March, facing the same issue, India’s domestic airlines had called for rationalisation of taxes on jet fuel. Ronojoy Dutta, whole-time director and chief executive officer, IndiGo, was quoted as saying then, “This situation adversely impacts us, given that ATF constitutes over 45 per cent of our operational costs. We have been in talks with the government to bring ATF under GST as it brings the benefit of input tax credit.” According to Dutta, such measures are needed now more than ever to offset this increase in cost and make flying viable for airlines and affordable for consumers. Impact on customers The immediate effect of the hike in ATF prices will be that airfare will increase significantly. SpiceJet’s Ajay Singh, in a statement, said that they will have to pass on the increase in ATF prices to flyers that will lead to an increase of up to 15 per cent in fares. “A minimum 10-15 per cent increase in air fares is required to ensure that cost of operations are better sustained,” he was quoted as saying to news agency PTI. Shortly after Singh made the announcement, the shares of the carrier went down by five per cent. The phenomenon was not limited to SpiceJet shares only. Almost all the airline shares were deep in the red after the rise in ATF price. Fares of domestic flights have already increased 20 per cent on average in the last two months as airlines passed the burden of increased fuel costs to passengers. Struggling to soar Airlines in India were able to breathe a bit easier in 2021 as domestic flight operations reached their pre-pandemic levels. However, it’s not been all high-flying as international services continue to remain curtailed due to COVID-related travel restrictions. While the Ministry of Civil Aviation (MoCA) removed all capacity restriction on scheduled domestic flights on 18 October 2021, the lower and upper limits on domestic air fares continue to remain in place. For example, airlines currently cannot charge a passenger less than Rs 2,900 (excluding GST) and more than Rs 8,800 (excluding GST) on flights with duration of less than 40 minutes. However, with this ATF price hike, leading to air tickets becoming dearer, there’s a chance that airlines will suffer, as the passenger load may reduce. With inputs from agencies Read all the Latest News , Trending News ,  Cricket News , Bollywood News , India News and Entertainment News here. Follow us on Facebook, Twitter and Instagram.