Airline Ticket Prices Remain High Despite Drop in Global Oil Costs
Current Situation for Indian Air Travelers
Indian air travelers may not experience a decrease in ticket prices in the near future, even with the recent fall in global crude oil prices. This is primarily due to airlines facing high aviation turbine fuel (ATF) costs, as reported by industry insiders. The pricing of aviation turbine fuel (ATF) is based on the Mean of Platts Arab Gulf (MoPAG) benchmark. Prior to the conflict, MoPAG was approximately $85 per barrel in February, but surged to around $126 per barrel in June, marking a nearly 45% increase from pre-war levels. Consequently, Indian air travelers are unlikely to see immediate benefits from the recent drop in global oil prices.
Industry experts suggest that it may take an additional 3-4 months for airlines to stabilize their operations. They noted that MoPAG prices must decrease further for airlines to experience a significant reduction in fuel expenses. When questioned about the potential removal of the fuel surcharge imposed by airlines, sources indicated that it is expected to remain for the time being, as the recent decline in ATF prices has not substantially affected airline operating costs. ATF constitutes nearly 40% of airlines' operating expenses, and despite the decrease in net fuel prices, airlines are still contending with high fuel costs due to elevated MoPAG levels.
Another industry insider mentioned that if fuel prices stabilize or continue to decline in the upcoming months, airlines might contemplate eliminating the fuel surcharge.
Government's Decision on ATF Prices
In light of the easing tensions in West Asia, the government has announced a reduction in Aviation Turbine Fuel (ATF) prices for domestic airlines by Rs. 5 per litre, bringing the effective price to Rs. 110 per litre. This announcement follows the Centre's revision of export duties on petrol, diesel, and Aviation Turbine Fuel for the fortnight starting July 1, while maintaining the excise duty on petrol and diesel sold within India.