A sharp surge in global oil prices amid the West Asia conflict has pushed Aviation Turbine Fuel (ATF) prices to record levels, but a calibrated government intervention limiting the hike for domestic airlines is expected to cushion passengers from steep fare increases while providing relief to carriers.
Calibrated ATF hike to protect passengers
Civil Aviation Minister K Rammohan Naidu said the decision by public sector oil marketing companies to implement only a partial and staggered increase in jet fuel prices for domestic airlines will help shield passengers from sharp fare hikes.
"In this challenging context, the decision by PSU Oil Marketing Companies, under the Ministry of Petroleum in consultation with the Ministry of Civil Aviation, to implement only a partial and staggered increase of 25 per cent (Rs 15/litre) for domestic airlines is both pragmatic and forward-looking, while ensuring that foreign routes bear the full market-aligned price," he said.
He noted that ATF prices, deregulated since 2001, are revised monthly based on international benchmarks and were expected to rise by over 100 per cent from April 1 due to global energy disruptions and the closure of the Strait of Hormuz.
According to the minister, the move will ease the burden on domestic airlines and ensure sectoral stability. He also thanked Prime Minister Narendra Modi and Petroleum Minister Hardeep Singh for the intervention.
ATF prices hit record high
Jet fuel prices more than doubled to a record Rs 2.07 lakh per kilolitre on Wednesday, reflecting a sharp spike in global oil prices. However, domestic airlines will face a moderated increase of around 8.5 per cent due to the government’s intervention.
For other operators such as non-scheduled, adhoc and charter carriers, prices have surged by 114.5 per cent, or Rs 110,703.08 per kl, to Rs 207,341.22 per kl.
This marks the first time ATF prices have crossed the Rs 2 lakh per kl mark, surpassing the previous peak seen in 2022 following the Russia-Ukraine conflict.
Explaining the move, the Ministry of Petroleum and Natural Gas said, "ATF prices in India were deregulated in 2001 and are revised on a monthly basis based on a formula of international benchmarks." It added, "In order to insulate the domestic travel costs from the substantial increase in international prices, PSU Oil Marketing Companies of the Ministry of Petroleum, in consultation with the Ministry of Civil Aviation, have passed only a partial and staggered increase of 25 per cent (only Rs 15/litre) to the airlines. Foreign routes will pay for the full increase in ATF prices consistent with what they pay in other parts of the world."
Airlines welcome relief amid rising costs
Airlines, already grappling with higher operational costs due to longer flight routes caused by airspace restrictions in West Asia, welcomed the move.
IndiGo said the partial hike would help insulate domestic air travel costs.
"The ongoing geopolitical situation in the Middle East has significantly affected global supply of Aviation Turbine Fuel (ATF) resulting in continuous and steep increase in its prices," the airline said in the statement.
“It was reviewing the impact of this revised ATF price on April 1 on its operating cost and will appropriately announce its revised fuel charges shortly."
The airline also thanked the government for "materially insulating the domestic air travel costs from the substantial increase in ATF prices and passing on partial and staggered increase of 25 per cent."
SpiceJet Chairman and Managing Director Ajay Singh termed the move a major relief.
"The government's decision to allow only a partial increase in Aviation Turbine Fuel prices comes as a significant relief for the Indian aviation industry at a time of unprecedented global uncertainty," Singh said.
He added that the intervention would help airlines navigate “one of the most challenging global crises in recent times, marked by severe external disruptions and volatility in fuel markets.”
Aviation stocks surge despite fuel hike
Shares of aviation companies rallied in early trade, reflecting investor optimism over the moderated impact of rising fuel costs.
InterGlobe Aviation, the parent of IndiGo, surged over 9 per cent, while SpiceJet shares rose nearly 5 per cent on the BSE.
Fuel costs and broader impact
Fuel accounts for around 40 per cent of an airline’s operating costs, making ATF price movements critical for the sector. Airlines are currently burning more fuel as they take longer routes for international flights due to regional airspace closures.
Meanwhile, commercial LPG prices were also raised by Rs 195.50 per cylinder in line with global trends, while domestic cooking gas rates remained unchanged.