Jet fuel prices will impact travellers; but is there a way out? Experts weigh in

A rise in aviation turbine fuel (ATF) or jet fuel prices will impact the travellers’ pockets, but industry experts say the impact will be temporary. 

Travel booking platform EaseMyTrip’s Himank Tripathi believes that this is a matter of the widening gulf between demand and supply and the situation will normalise the moment there is an upward movement in supply.

“Right now, the demand and supply are not matching. Because of high demand and low supply, rates are high,”  Himank Tripathi, president of external affairs at EaseMyTrip told BusinessToday.In. He also mentioned that aircraft carriers have no other option but to hike airfares since the hike in fuel rates impacts the entire operational cost.

“If the fuel with which your planes are running goes up, then the whole operational cost goes up. They have no other option but to increase their fare. But what we feel right now is this is going to be a temporary phase. The moment you have more supply coming in, which we believe will happen very soon. All the flights have been resumed, be it international or domestic,” he said.

He further noted, “Second is the price of fuel. The moment it comes down to a stability part to the normalcy, I think fares will come down. So, it’s a temporary phase. Both the things have impacted the travel season at the same time.”

Airfares for popular destinations like Goa and Kashmir have gone up because the tourist demand for these places has shot up, especially with the return of revenge travel on the back of two years of the pandemic wreaking havoc on people's travel plans. 

“Especially in places like Goa, people are going there for leisure travel. There, the rates will go up. In fact, we saw a 40-50 per cent rise in demand for places like Kashmir, Himachal Pradesh and Goa,” Tripathi added. He also mentioned that he hopes that the situation will get back to normal “very soon.”

Talking about the overall trends, he said, “Overall what we are seeing is the demand is not going down. Overall air bookings are increasing by 30 per cent month-on-month basis as compared to last year. So, the travel sentiments are very positive. People are just ready to go out and they have built their immunity basis the vaccination drive.”

The rise in aviation turbine fuel has impacted the airfares in some routes of major cities like Mumbai, Kolkata and Delhi and India’s air passenger numbers still continue to remain 25 per cent below the pre-COVID peak, according to experts. Airline operators are likely to manage this cost by providing value-added services at an affordable cost and also by hedging fuel prices in attempt to pass on lesser costs to the consumers.

“Airfares in some routes of major cities like Mumbai, Kolkata, and Delhi are up by 25-30 per cent. Although India’s daily air passenger numbers are still 25 per cent below the pre-COVID peak. There is a good amount of pent-up demand as many travel sites are experiencing trip queries despite high fares for travel. Airline operators are expected to manage this situation by providing low-cost value-added services and hedging fuel prices to try to pass lesser costs to customers,” Founder and Director at Proficient Equities Limited Manoj Dalmia said.

Another expert states that airlines in India might find it difficult to pass on the raised costs of running an airline onto the passengers simply because the market is price sensitive and this could lead to a fall in demand, which is a detriment for an industry struggling to claw back from the impact of coronavirus-induced restrictions.

“Aviation industry that [has] reported huge losses over the last few quarters due to the pandemic is still in recovering phase. In this scenario, a rise in jet fuel prices is definitely going to hit the operational cost and profit margins of the airlines. However, airlines may find it difficult to pass the cost to passengers due to price sensitive sentiments in India. If that [airlines passing the raised costs to passengers] happens, an impact on the demand could be clearly seen,” Vice President and Head of Research at Share India, Ravi Singh noted.

Also read: Aviation experts call for bringing ATF under GST after recent price rise 

Also read: ATF price hiked by 2%, costs over Rs 1 lakh in Delhi