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Airlines including Air India and IndiGo, the two largest, have signed cheaper contracts for the supply of aviation turbine fuel (ATF) in 2025 compared to 2024, multiple officials aware of the negotiations told Moneycontrol.

Both Air India and IndiGo have signed ATF supply contracts with Indian Oil Corporation Ltd in 2025 at a lower price than in 2024, a senior official from the oil marketing company (OMC) told Moneycontrol.

"When we sign a deal with an airline, there are two components. One is the international crude prices and other is the discounts. Indian Oil has ATF deals with two airlines: IndiGo and Air India. We gave higher discounts to both airlines this year. The discounts vary depending on the airport. Some airports have higher traffic or demand, discounts depend on that as well," the executive told Moneycontrol on condition of anonymity.

Another executive from the OMC said that while crude prices have fallen significantly, they have not directly translated to a fall in ATF product cracks.

"We don’t make a call on the (ATF) deal with airlines based only on prevailing crude oil prices but also on ATF cracks. You have to look at the full picture," the second Indian Oil executive told Moneycontrol.

ATF product cracks were healthy in 2024-25 (FY25) but lower than the previous year. Product crack refers to the difference between crude oil prices (raw material) and the price of that particular refined product—in this case ATF. In the last quarter of FY24, ATF product cracks were trading at $21 per barrel, compared to $13.40 per barrel in Q4FY25, according to data shared by rating agency ICRA.

OMC Indian Oil, Bharat Petroleum and Hindustan Petroleum supply ATF to domestic airlines across India for both local and international flights. The OMCs usually sign year-long contracts with the carriers based on crude oil and ATF product crack projections for the financial year.

Senior executives from domestic airlines told Moneycontrol that they had been negotiating for fuel prices as part of their yearly contracts with OMCs following a nearly 30 percent fall in the price of crude oil, from around $95 a barrel in November 2024 to $60 a barrel in March 2025.

They added that ATF prices in India have not fallen in the same range as crude prices have, having just a mere 2.4 percent reduction in the last six months. According to the Indian Oil website, the ATF price as on May 1 stood at Rs 85,486.80 per kilolitre in Delhi and at Rs 88,494.52 per kilolitre in Chennai.

The price of ATF in Delhi stood at Rs 87,597.22/kl in October 2024, Rs 90,538.72/kl in November 2024, Rs 91,856.84/kl in December 2024 and 89,442.18/kl in April 2025.

According to industry experts, Air India (which includes both Air India and Air India Express) uses around 200-250 kilolitres of jet fuel each day, while IndiGo consumes around 350-400 kilolitre a day. Fuel is the biggest component of costs for any airline.

Cheaper oil prices could save airlines millions for the current financial year, helping them improve their profitability, and also lead to lower airfares.

Airlines as part of their contract negotiations for ATF supply were also looking for better prices as they don’t expect crude prices to not cross the $90 a barrel price in FY26.

Airlines also typically hedge against the crude and ATF product crack prices to make up for any large-scale volatility in international crude and ATF prices. In 2016, for instance, Air India was said have hedged 2 million barrels of ATF annually at $75 per barrel, which covered more than a fifth of its fuel requirements, as the airline did not expect oil prices to fall any further.

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