India has reduced the price of aviation turbine fuel (ATF), commonly known as jet fuel, by ₹5 per litre from July 1, offering relief to airlines after weeks of elevated fuel costs. The reduction comes as international crude oil prices have softened following an easing of supply concerns in global energy markets.

Following the latest revision, the price of jet fuel in Delhi has come down to around ₹110 per litre, marking the first reduction since the West Asia crisis pushed aviation fuel prices to record levels. ATF prices are revised twice every month by state-owned oil marketing companies based on changes in global crude oil prices and the rupee-dollar exchange rate.

Relief for Airlines

Fuel cost represents the highest operational cost for all airlines at almost 35%-40% of the total cost. The fall in the price of ATF will help reduce the cost of operation and improve the financial standing of domestic airlines especially during peak travel seasons.

Although the fall in fuel cost will benefit the airline companies, according to aviation experts, this does not necessarily mean that the fares will be reduced as there are other factors which determine the price of tickets including the demand, competition, airport fees, and operational cost.

Why ATF Prices Have Come Down

The reduction is due to the fall in the price of crude oil in the international market, which was witnessed after the situation regarding the threat of any possible disruption in the oil supply from West Asia settled down. The apprehension of disruption of crude oil flow through the Strait of Hormuz, one of the busiest oil shipping channels in the world, caused a rise in the price of crude oil.

ATF prices in India are reviewed twice every month by public sector oil marketing companies. The revisions are based on changes in international benchmark crude oil prices and fluctuations in the rupee-dollar exchange rate, making aviation fuel prices closely linked to global energy markets.

Growing Aviation Sector to Benefit

India is one of the fastest growing aviation marketplaces in the world where there has been steady growth in the number of passengers using the services, alongside growth in the fleets and network of airlines. Stable fuel costs have become quite essential as more flights have been added and airlines purchase new planes to cope up with increasing demand.

A reduction in the price of ATF can also help in improving the cash flow of airlines so that they can manage their expenses. Although this particular reduction will not have any immediate impact on the ticket prices, it will ensure that there is more stability within the aviation industry.