The government on Friday raised the prices of petrol, diesel and CNG as the blockade of the Strait of Hormuz continues amid the escalating conflict involving the United States, Israel and Iran.
Petrol prices
were increased by Rs 3.14 per litre and diesel prices by Rs 3.11 per litre, while CNG prices were also hiked by Rs 2. The move came as global crude markets remain volatile due to concerns that the Strait of Hormuz, one of the world’s most critical oil chokepoints, could remain disrupted for an extended period.
Now, attention is increasingly turning towards another sensitive fuel category: aviation turbine fuel (ATF), or jet fuel.
Why Jet Fuel Is Becoming A Concern
ATF is one of the biggest costs for airlines globally. In India, it typically accounts for around 40 per cent of an airline’s operating expenses. During periods of sharp fuel spikes, Indian airline associations have said this burden can rise to as much as 55-60 per cent.
Unlike petrol and diesel, ATF prices are revised monthly by oil marketing companies (OMCs) based on international fuel prices. The last revision came on May 1, when public sector OMCs kept ATF prices unchanged for scheduled domestic flights but increased prices for international and non-scheduled operations.
According to Indian Oil Corporation (IOC), the decision was part of an effort to protect domestic consumers from the impact of the West Asia conflict and soaring international oil prices.
At the time, the price of ATF for international flights was increased by $76.55 per kilolitre to $1,511.86 per kilolitre. Domestic carriers, however, were spared a fresh increase after already facing a partial hike in April.
On April 1, OMCs had raised ATF prices for scheduled domestic flights by Rs 15,000 per kilolitre to Rs 1,04,927 per kilolitre in Delhi. But the full increase was passed on to international flight operations, translating into a much steeper jump.
Why Airlines Are Nervous
Indian airlines had already warned the government that the existing ATF pricing mechanism was becoming unsustainable.
In a letter to the Ministry of Civil Aviation in April, the Federation of Indian Airlines (FIA), which includes IndiGo, Air India and SpiceJet, argued that the “ad hoc” pricing system was creating severe imbalances between domestic and international operations.
The airlines had urged the government to reintroduce “crack spread bands” — a mechanism that limits how much margin oil companies can charge on jet fuel — and sought greater parity between domestic and international ATF pricing.
Even then, carriers warned that surging fuel costs were making airline networks financially difficult to sustain.
Now, with petrol, diesel and CNG prices also being increased amid the ongoing Hormuz crisis, aviation fuel may no longer remain insulated for long.
Global Airlines Have Already Started Reacting
The pressure is not limited to India.
According to a Reuters report, jet fuel prices globally have surged from around $85-$90 per barrel to as high as $150-$200 per barrel amid the Iran conflict, forcing airlines across the world to cut flights, raise fares, suspend outlooks and impose fuel surcharges.
Air India reportedly discussed furloughing some non-technical employees and reducing flight capacity by over 20 per cent for three months, according to Bloomberg News.
IndiGo had already introduced fuel charges on domestic and international routes earlier this year, including additional charges on flights to the Middle East and Europe.
Globally, airlines including Air France-KLM, Lufthansa, Delta, United Airlines, Thai Airways, Qantas and Air Canada have either raised fares, reduced capacity, cut forecasts or added fuel surcharges as jet fuel costs surged.
Some airlines have also warned that passengers may ultimately bear part of the burden through higher ticket prices and additional fees.
Why The Strait Of Hormuz Matters So Much
The Strait of Hormuz handles roughly one-fifth of the world’s oil and gas trade, making it one of the most strategically important maritime routes globally.
Any prolonged disruption in the passage immediately impacts global crude supplies, shipping insurance costs and fuel markets.
The current blockade fears linked to the Iran conflict have already triggered volatility in crude oil prices and raised concerns over broader inflationary pressure worldwide.
India, which imports the bulk of its crude oil needs, remains especially vulnerable to such disruptions.
Will Airfares Rise Next?
There has been no announcement yet regarding a fresh increase in domestic ATF prices. But continued pressure on crude and jet fuel markets could make another revision difficult to avoid if the Hormuz disruption persists.
The government had so far attempted a calibrated approach by protecting large sections of domestic consumers while allowing price revisions in select segments such as international ATF and commercial LPG.
But with retail fuel prices now also rising, the aviation industry may increasingly find itself exposed to the next wave of fuel cost pressures.
