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Airfares will rise following the levy imposed by the government. Pictured: Representational Image.Reuters file

Aviation turbine fuel (ATF), or jet fuel, prices were reduced by 4 percent applicable from midnight of July 31, 2016 and August 1,2016. This is the first time the jet fuel prices have fallen after rising for five straight months.

In a statement, state-run Indian Oil Corporation (IOC) said that the ATF prices for August have been decreased to Rs. 47,206 per kilolitre (kl) in New Delhi, when compared to Rs. 49,287 in July. In foreign currency, the price was fixed at $496.46/kl. 

ATF prices account for nearly 30-35 percent of operating costs for airlines and directly impacts profit margins. The jet fuel prices differ in different cities.

The revised jet fuel prices, new and old (per kilolitre) are: 

Cities Previous price (July 31) New price (August 1)
Delhi Rs. 49,287 Rs. 47, 206
Mumbai Rs. 48, 322 Rs. 46, 242
Kolkata Rs. 54, 114 Rs. 52, 089
Chennai Rs. 52,110 Rs. 49,991

Impact on share prices 

The price cut did not result in a secular rally in the share prices of aviation companies. While SpiceJet shares were up 2.18 percent at Rs. 68 apiece on the BSE at around 11.16 a.m, Indigo-owner Interglobe Aviation was down 0.73 percent at Rs. 982.15. The Jet Airways stock was almost flat at Rs. 619.80.

Shares of state-run oil marketing companies gained in a range. IOC shares were up 0.30 percent at Rs. 545.05 apiece, BPCL at Rs. 596.75 (up 0.71 percent) and HPCL at Rs. 1,264.80 (up 0.35 percent). HPCL had recently announced bonus issue of 2:1.

[1 lakh = 100,000 | 1 crore = 10 million | 100 crore = 1 billion]