Shares of aviation companies like InterGlobe Aviation Ltd. and SpiceJet Ltd. tumbled on Tuesday after an increase in Aviation turbine fuel (ATF) prices for domestic airlines.
IndiGo's shares slumped as low as 3.6% to Rs 5,042.5 apiece on the NSE while Spicejet fell 2% to Rs 10.12 on the BSE.
The prices have been increased by 5.46%, or Rs 6.28 per litre, according to sources at Indian Oil Corporation Ltd. (IOCL). The price has been raised from Rs 115 per litre to Rs 121.28 per litre, marking the second consecutive monthly increase.
The latest increase will raise fuel costs for domestic airlines and could put pressure on airfares. However, changes in ticket prices also depend on passenger demand, competition and available network capacity.
As of 12 p.m. IST, IndiGo pared some losses to trade 3% lower at Rs 5,090 and Spicejet was down 1.26% at Rs 10.19.
Second straight hike
IOCL sources said the latest increase follows a Rs 5 per litre hike on Aug. 1, when ATF prices for domestic airlines rose from Rs 110 per litre to Rs 115 per litre. ATF prices had been cut by Rs 5 per litre in July.
Jet fuel accounts for about 35% to 40% of an airline's overall operating expenditure in India, making ATF prices a key cost for domestic carriers
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