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BL Research Bureau

The 4 per cent hike in aviation turbine fuel prices, effected by the oil majors is beginning to filter down to domestic jet fuel prices.

This would resurrect margin pressures for domestic airlines, with low cost carriers such as Deccan Aviation and SpiceJet likely to be more vulnerable, given their greater sensitivity to cost.

Domestic ATF prices have ruled about 10 per cent below last year’s levels in the July-September quarter on the back of softer trends in oil prices. But with global crude oil prices rising above the $80 mark, jet fuel prices could again go up.

Rising fuel costs could take away some of the benefits that were expected to flow to domestic airline companies on the pricing front, on account of the recent consolidation in the sector.

The recent spate of deals in the sector—with Jet Airways acquiring Air Sahara, Air Deccan forming an alliance with Kingfisher and the Indian Airlines-Air India merger—was expected to bring greater rationality to fares and allow airlines to effect gradual increases in fares, after offering significantly discounted fares, over the past couple of years.

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