The demand for aviation turbine fuel (ATF) has increased due to a spike in domestic air travel. The pandemic caused airlines to curtail flights amid a dramatic drop in passenger traffic. Therefore, the demand for ATF or jet fuel declined sharply in 2020 and 2021. In any case, ATF sales are projected to rebound in India, after the government has allowed airlines to operate at 85% of their pre-pandemic capacity.
According to the data from Indian Oil Corporation Limited (IOCL), there is a sharp rise in the price of jet fuel from Rs. 42,000 per kiloliter in 2020 to its price of Rs. 68,609.22 per kilolitre in 2021. And analysts have estimated that Indian airlines might run losses during the coming quarters. This could become a hindrance to the airlines as the costs will be passed on to the passengers.
ATF accounts for about 30-40% of the overall airline cost. And during the June quarter, airlines were operating at a much lower capacity than March as it was hit by the second wave of coronavirus. Nonetheless, as per ICICI Securities’ report, a seasonally strong Q3 of 2021 and increased flying capacity should contribute to limiting the losses.