Jet Fuel Prices Rise 5% to Record High; Air fares are expected to rise

NEW DELHI : Aviation turbine fuel (ATF) prices hit new highs on Friday. The price of ATF rose 5.29% to 1,23,039.71 per kiloliter in the national capital. On May 2, it was brought to 1 16,851.46 per kilolitre.

Airline fares, which are already high, are expected to increase further with the latest hike, as ATF prices make up a large portion of an airline’s operating costs.

“If we compare current domestic airfares to what they were in January, fares have increased by 30-40% on average across most sectors. Compared to the same period last year, airfares on some popular routes have increased by more than 50%,” said Aloke Bajpai, group chief executive and co-founder of Ixigo.

Over the next six months, he said, much will depend on the outcome of the Russia-Ukraine crisis and whether there is a resolution on the table to drive down oil prices. “Travel demand remains weak compared to what the industry expected it to be due to high airfares,” he said.

Rising ATF prices continue to dampen industry profits, with prices in May 2022 being 89.2% higher on an annual basis (year-on-year), according to a recent Icra report.

Since the Russian-Ukrainian war broke out in February, the oil market has become more volatile and crude prices have hit multi-year highs, before easing to some degree.

Oil prices fell on Monday as traders booked profits. At the time of writing, the July Brent contract on the Intercontinental Exchange was trading at $111.00 per barrel, down 0.49% from its previous close. The West Texas Intermediate June contract on the NYMEX fell 0.3% to $110.16 a barrel.

Prices are expected to be high, analysts said. “China’s industrial production and retail sales data released today (Monday) showed signs of mounting pressure on the economy under a zero-tolerance policy,” said Ravindra Rao, Head of Commodities Research, Kotak Securities.

On Monday, China reported lower retail sales and industrial production in April. Retail sales fell 11.1% in April from the same period a year ago and industrial production fell 2.9% in April on an annual basis. The economic slowdown in China is a major concern for the oil market as the country is one of the biggest importers of the raw material.

Despite the volatility in the oil market, retail gasoline and diesel prices in India remained unchanged. In Delhi, gasoline is sold 105.41 per litre, while diesel is priced at 96.67 per liter. Retail transport fuel prices, which directly affect the common man, remained unchanged for about 40 days after rising by 10 per liter from March 22 to April 6 due to soaring oil prices in the context of the Russian-Ukrainian conflict.

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