New Delhi: Rising Aviation Turbine Fuel (ATF) prices are putting fresh pressure on Indian airlines, with carriers reducing flight frequencies on some routes as they look to control operating costs. The latest increase has pushed domestic ATF prices to Rs 121.28 per litre, adding to concerns over airline profitability and passenger fares.
ATF prices were increased by Rs 6.28 per litre, or 5.46%, from September 1. This was the second consecutive monthly increase after prices went up by Rs 5 per litre in August. In July, ATF was priced at Rs 110 per litre, meaning the latest rate is now Rs 11.28 per litre higher than it was two months ago.
The increase comes at a time when airlines are already facing pressure to manage costs while maintaining capacity and competitive fares. Fuel is among the largest expenses for an airline and can account for around 40% to 60% of operating costs, according to the report cited by India Today.
Why are ATF prices rising?
ATF prices in India are revised by state-owned oil marketing companies based on international benchmark rates and currency movements. When global fuel prices rise or the rupee weakens against major currencies, the cost of aviation fuel can increase for domestic carriers.
The latest rise follows an increase in August, marking two successive months of higher fuel costs for airlines.
The July price of Rs 110 per litre had provided some relief to carriers. However, the subsequent increases have reversed part of that benefit, with the September price now standing above the July level by more than Rs 11 per litre.
For airlines, the impact can be significant because aircraft fuel consumption represents a major component of operating expenses. A sustained rise in ATF costs can squeeze margins unless carriers are able to offset the additional expense through higher ticket prices, better aircraft utilisation or other cost-cutting measures.
IndiGo cuts flights on key routes
The impact of higher fuel costs is already being seen in airline schedules.
According to a Times of India report cited by India Today, low-cost carrier IndiGo has reduced flight frequencies from Hindon civil terminal near Delhi-NCR on three routes — Navi Mumbai, Kolkata and Varanasi.
Flights between Hindon and Navi Mumbai have reportedly been reduced from daily services to four days a week. Kolkata services have been cut from daily to two days a week, while Varanasi flights have been reduced from six days a week to five.
IndiGo continues to operate five routes from Hindon — Varanasi, Bengaluru, Kolkata, Chennai and Navi Mumbai. Bengaluru remains a daily service, while the other routes have fewer frequencies under the September schedule.
The changes highlight how airlines can respond to rising costs without immediately increasing fares across their networks. Reducing frequencies on routes with weaker demand can help carriers improve aircraft utilisation and control fuel expenditure.
Airlines already cutting capacity
The pressure is not limited to individual routes.
According to the report, IndiGo had reduced domestic capacity by around 5% to 7% to manage losses, while Air India had reduced flight frequencies by as much as 22%.
Such adjustments can affect the availability of flights, particularly on routes where demand is relatively weaker or where airlines find it difficult to maintain profitability at existing frequencies.
For airlines, capacity management becomes particularly important when fuel costs rise sharply. Operating an aircraft with fewer passengers can make each flight less economical because fuel and other fixed costs still have to be paid.
Carriers may therefore choose to consolidate flights, shift aircraft to stronger routes or adjust schedules according to passenger demand.
Government approves Rs 10,000-crore support fund
The sharp rise in ATF prices has also prompted government intervention.
In June, the government approved a Rs 10,000-crore ATF price stabilisation fund aimed at helping airlines deal with sudden increases in jet fuel costs. The measure, reported by Reuters, was intended to provide a cushion to airlines and support domestic as well as international air connectivity during periods of fuel-price volatility.
The stabilisation mechanism is particularly important because airlines have limited control over international fuel prices. While carriers can improve efficiency and manage their networks, they cannot directly determine the global benchmark prices that influence ATF costs.
The effectiveness of the support will depend on the extent and duration of the fuel-price increase and how the mechanism is implemented.
What does it mean for passengers?
Higher ATF prices do not automatically mean an immediate increase in airfares.
Airlines have several options when fuel costs rise. They can adjust flight schedules, reduce frequencies on weaker routes, move aircraft to routes with stronger demand, improve aircraft utilisation or seek savings elsewhere.
However, if fuel prices remain elevated for an extended period, higher ticket prices could eventually become necessary to protect margins.
Passengers could therefore face two forms of impact — fewer flight options on certain routes and potentially higher fares.
The timing is significant because airlines are approaching the traditionally busy festive travel period in India. Stronger demand during the season could allow carriers to absorb some additional costs through better aircraft occupancy, but it could also mean higher fares if capacity remains constrained.
Why ATF matters so much to airlines
Unlike many other industries, airlines have limited flexibility when it comes to fuel consumption. Aircraft require large quantities of aviation fuel, and even small changes in fuel prices can have a substantial effect on operating expenses when multiplied across thousands of flights.
Fuel can account for roughly 40% to 60% of an airline’s operating expenses, making ATF one of the most important variables in determining profitability.
This is also why airlines closely monitor global crude oil and refined fuel markets, currency movements and domestic ATF pricing.
When fuel prices fall, airlines can benefit from lower operating costs. When they rise sharply, carriers have to decide whether to absorb the increase, raise fares or reduce capacity.
Airlines face a balancing act
The latest ATF increase presents Indian airlines with a difficult balancing act.
Reducing flights can help control costs, but excessive capacity cuts could reduce connectivity and potentially push up fares. Increasing ticket prices can protect margins, but higher fares may discourage price-sensitive travellers. Maintaining capacity can support market share, but it can become expensive when fuel prices remain high.
For passengers, the immediate impact may therefore vary depending on the route and airline.
The situation will become clearer if ATF prices remain elevated over the coming months. If fuel costs stabilise or decline, airlines could regain some cost relief. But continued increases could lead to further schedule adjustments and greater pressure on fares.
Conclusion
The latest ATF increase to Rs 121.28 per litre has added another layer of pressure on Indian airlines at a time when carriers are already focused on managing costs and capacity.
IndiGo’s reported reductions on select Hindon routes and wider capacity adjustments by major airlines show how fuel-price changes can influence network decisions. The government’s Rs 10,000-crore stabilisation fund is intended to provide support, but the longer-term impact will depend on how global fuel prices and currency movements evolve.
For travellers, the key concern will be whether airlines continue to absorb higher fuel costs or pass part of the increase through fares and reduced flight availability. With the festive travel season approaching, the direction of ATF prices could have a significant bearing on India’s aviation sector in the coming months.