Market veteran Deepak Talwar discusses the rise in the cost of ATF and its consequences. The hike might have a serious impact on aviation firms’ finances that are already beneath immense stress amid high debt.

Since the revenue stream continues to be weak for most airlines, the hike in ATF prices could further derail future plans for airlines, which are already struggling with major expenses like salaries, airport charges, and more.

Aviation turbine fuel is at a three-year high of Rs 57,349 a kilolitre, while the diesel price is at an all-time high of Rs 60.12 a liter (both for Delhi). With little fiscal room available for the government to maneuver on duties, the days of high-fuel cost are threatening to be back again.
It is to be noted that 35-50% of the value of running an airline is that the cost of Aviation rotary engine fuel (ATF) in India. This more supports the very fact that alongside the debts, airlines will deal with more pressure and might have to make desperate ways so as to survive.

The seasoned analyst Deepak Talwar uncovers the plight of the aviation industry. He highlights the fact that Indian airlines give up 40-50% more on ATF costs as compared to others across the globe. With the hike in the prices, the consequences won’t be profitable for anybody.
The increase in ATF prices may additionally have a cascading impact on airfare as the majority of the overhead of airlines is attributed to fuel costs.

“Battered by a perpetually decreasing rupee and rising costs, last blow India’s airline corporations required right away was a hike in aviation turbine fuel (ATF) price.
But that’s precisely what the country’s state-run oil marketing corporations (OMCs) have provided the beleaguered traveler carriers. these days (Oct. 01), the OMCs exaggerated ATF costs by 7.25%.” added Deepak Talwar.

The OMCs haven't enclosed the 5% customs levied by the govt within the latest revision. Now, a kilolitre of ATF is priced at Rs74,177 in Mumbai. In Delhi, it's expected to value around Rs74,530 per kilolitre.

Aviation industry expert Deepak Talwar also said “Fuel cost hikes impact Indian aviation firms over the foreign ones operative within the country. Typically, fuel accounts for 24.2% of an airline company’s costs. For Indian companies though, it accounts for 34% thanks to a scarcity of competition among those who supply fuel at Indian airports, and thus there goes a lot of work in keeping up with the flexible fuel costs.”

Deepak Talwar believes that the safest way for the airlines to hedge the oil is by buying or selling at the expected future cost of oil through a spread of derivatives, it'll curb the increase in price.

The rise in price comes just before India’s famous festive season. The burden due to the rise in fuel price is going to be passed on to the consumers, which will make traveling by air costlier. Airfares are expected to stay high from October to December owing to festive demand.

Deepak Talwar additionally suggests some ways that make it easier to tackle the unsteady oil prices: Purchase of Current Oil Contracts to hedge oil is completed once airlines expect an increase within the price in the future. Another way, buying call options offer the client the right to shop for stock or goods at a selected price before a specific date.

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