&imwidth=800&imheight=600&format=webp&quality=medium "India cuts jet fuel prices by Rs 5 amid falling global oil costs: Will airfares get cheaper?")
The Indian government on Wednesday (July 1) has cut aviation turbine fuel (ATF) prices by about Rs 5 per litre, offering relief to domestic airlines. This comes after global crude oil prices ease with Brent crude trading around $73 per barrel and WTI hovering near $70 per barrel. The ease in global oil price comes amid a fragile ceasefire between the US and Iran after months of war that disrupted the major shipping route - the Strait of Hormuz. ATF will now cost around Rs 110 per litre in Delhi, according to a PTI report. The step by the Indian government came a day after it revised export duties on petrol, diesel and ATF for the fortnight beginning July 1, while leaving excise duties on petrol and diesel sold domestically unchanged.
What this means for airlines prices?
ATF is the largest operating cost for airlines and can account for up to 60 per cent of total expenses during periods of high oil prices. As the price rose during the war, all major airlines worldwide imposed fuel surcharge. Similar steps were taken by Indian airlines, much to the discomfort of the passengers. After the price rise during the period of the war, to help the domestic airlines, the government approved a Rs 10,000 crore fund for them to manage fuel price volatility and reduce the risk of sudden airfare spikes.
Now, with ATF price reduction, airlines may reduce ticket prices or remove fuel surcharges as ATF becomes cheaper. Lower fuel costs will also improve airlines' margins while allowing them to keep fares competitive. It is time for passengers to keep a watch on ticket prices after ATF cut price. Some carriers may pass on the savings faster by reducing or eliminating fuel surcharges. However, aviation expert say that seasonal demand can still keep fares high, but booking in advance remains the best way forward.
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