ATF Price Drop Fuels Airline Stock Surge

1 Oct 2024 , 01:04 PM

InterGlobe Aviation and SpiceJet shares rose more than 5% in the early session on October 1, after the Centre reduced jet fuel or aviation turbine fuel (ATF) costs.

Following the notification, ATF prices in Delhi have been reduced by 6% to Rs 87,597 per kg, down from Rs 93,480 per kg earlier. The cost of jet fuel has fallen to its lowest level since April 2024.

At 1:00 p.m., Indigo operator InterGlobe Aviation shares were trading at Rs 4,906 on the NSE, up 2.5%. SpiceJet’s stock price surged more than 5% to Rs 67.2 per share.

ATF is not subject to GST; instead, it is taxed at the state level, with excise duty and VAT applied. These taxes vary by state, raising operating costs for companies such as airlines, who have advocated for standardised taxation. In some states, VAT on ATF can be as high as 30%.

Domestic airlines had proposed that jet fuel or aviation turbine fuel (ATF) be included in the goods and services tax ahead of Budget 2024, allowing them to collect input tax credits and reduce total expenses.

Jet fuel accounts for roughly 40% of overall domestic airline expenses. A reduction in ATF will help lower ticket prices.

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