Fuel costs are also coming under pressure. Latest development in this chain is a sharp increase in aviation turbine fuel prices, which could raise operating costs for domestic airlines and put pressure on airfares.

How much has ATF price increased?

Aviation turbine fuel, or ATF, prices for domestic airlines have been increased by 5.46%. In absolute terms, the hike is Rs 6.28 per litre. Price has increased from Rs 115 per litre to Rs 121.28 per litre, according to sources at Indian Oil Corporation Ltd. Latest increase marks the second consecutive monthly hike in jet fuel prices. Airlines are likely to face higher fuel expenses as a result.

Why has jet fuel become more expensive?

Latest hike comes amid renewed pressure in global crude oil markets. Fresh hostilities between the U.S. and Iran have raised concerns about prolonged disruption to energy supplies through the Strait of Hormuz. West Texas Intermediate crude was trading above USD 86 a barrel after gaining 2.8% in the previous session. Brent crude settled close to USD 90 a barrel on Monday. Oil prices had a volatile August as markets responded to changing developments around efforts to end the conflict and growing concerns over the impact of U.S. measures against Iran.

Why is ATF important for airlines?

Fuel is among the biggest expenses for Indian airlines. ATF typically accounts for around 35% to 40% of an airline's overall operating expenditure. Sustained rise in jet fuel prices can therefore directly increase the cost of operating flights. Airlines may try to absorb part of the increase or pass some of the additional cost on to passengers.

Will airfares increase?

Higher ATF prices can put pressure on airfares, but a fuel price increase does not automatically mean that ticket prices will rise immediately. Airlines also consider passenger demand, competition and available capacity before changing fares. Routes with strong demand may see quicker adjustments while intense competition could limit how much of the additional fuel cost carriers can pass on.

Why is this a concern for India?

Latest ATF hike comes at a time when higher crude oil prices are already creating wider economic concerns for India. Country remains heavily dependent on imported crude. Sustained increase in global oil prices can raise the import bill and add pressure on the rupee and inflation. For the aviation sector, higher ATF prices add another cost challenge. For passengers, it could eventually mean more expensive air travel if airlines are unable to absorb the increase. With geopolitical tensions continuing to keep oil markets volatile, fuel costs will remain a key factor for airlines and travellers in the coming months.