In a development that could significantly impact the aviation industry, jet fuel prices, also known as aviation turbine fuel (ATF), have been slashed to ₹1.01 lakh per kilolitre in Delhi, down from ₹1.06 lakh. As trading kicks off on Monday (January 1), aviation stocks, including major players like Interglobe Aviation (IndiGo), Spicejet, and Jet Airways (India), are expected to be in the spotlight.
The second quarter of the previous year witnessed a steady rise in ATF prices, culminating in a peak of ₹1.12 lakh on September 1, 2023. This period marked a 26% increase, impacting the operational costs of airlines significantly. The subsequent reduction in ATF prices is poised to provide relief to airlines, given that fuel constitutes nearly 40% of their operating expenses.
Airlines typically revise ATF prices based on the average rates of international benchmarks and foreign exchange rates at the beginning of each month. The current rate cut is expected to have a positive impact on the financials of airline companies, potentially leading to a moderation in ticket prices.
Investors are keenly watching the reactions of major aviation stocks as the reduced jet fuel prices could contribute to easing the financial strain on the sector. The cost savings from this rate cut could play a crucial role in stabilizing the industry and enhancing its competitiveness.
