Aviation stocks tumble as ATF rises

Jet Airways is down 3.75%  and Spicejet has also tumbled down over 4%. These two listed aviation stocks are showing a lot of turbulence today, nose diving into the red.  As such there was nothing in the Budget for the sector and it had a rude shock – the price of aviation turbine fuel (ATF) was increased to Rs.50,363/kiloliter, up from Rs.46,513/kiloliter. This is effective from yesterday midnight.

ATF prices have been going down since October, factoring in the decline in crude oil and this price hike thus came in as a very unpleasant happening.  With ATF cost accounting for 40% of the airlines total cost, any price hike means a direct hit on the margins. But the airlines should be hit as much as throughout the time when ATF prices were cut it never passed on the benefit to the customers with reduced tariff, continuing with the old rates.