India could see a spike in airfare and gold prices, with a further increases in oil prices and a plunge in rupee value against US dollar expected in the coming days, following Friday’s US military action against Iran.
Aviation industry experts said Indian carriers will be forced to increase airfares because of the double impact of an anticipated escalation in aviation fuel price and plunge in rupee value.
The cost of aviation fuel accounts for more than one-third of the operational costs for airlines, while a weak rupee will adversely impact Indian carriers’ foreign currency pay-out on account of aircraft lease charges and spare parts costs.
“Oil price rises will cause airlines to increase airfares if they haven’t hedged fuel costs in advance,” Saj Ahmad, senior analyst at London-based StratAero Research, told Arabian Business.
“Secondly, we may well see a temporary drop in demand for flights out of India that have to navigate over Iranian airspace,” he added.
A senior official with Air India Express, which mainly operates its flights to the Middle East region, told Arabian Business, “No increase (in airfare) has been effected yet”, adding that “maybe in 2 days we will have a clearer picture.”
An Air India spokesperson told Arabian Business that it was too early to comment.
Rupee impact
“Crude prices are very sensitive to Iran situation. This time around also, there is possibility of crude prices rallying to reach about $80 per barrel,” Ajay Kedia, managing director of Kedia Commtrade and Research told Arabian Business.
“The immediate impact of oil price rise will be on rupee, which we expect to drop to 74 against US dollar in this quarter,” Kedia added.
Rupee lost 39 paise to reach 71.76 against the greenback at the closing hours on Friday.
Gold prices
Gold prices jumped $20 to $576 per 10 gm in Delhi and other markets across India, reacting to the fall in rupee and the overall anticipation of a rally in the price of the precious metal in the wake of the escalating tension in the Middle East.
“Customers will stay away from the market till price settles down.” Surendra Mehta, Secretary, Indian Jewellers and Bullion Association, told Arabian Business, ruling out a possible major spike in gold jewellery prices in the coming days.
UAE is among major exporting country for refined gold to India.
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