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The two per cent cut in jet fuel prices on Thursday will have little impact on airline companies, analysts say. Fuel accounts for 40 per cent of airline companies' expenditure.
Passenger fares are not headed down for now. “The aviation sector is reeling under losses. And in such a scenario, it will be difficult to bring down the fares. Airlines would use any dip in fuel price to consolidate their profits,” an official of an airline company said.
Aviation analysts feel that the difference would be minimal. “Since international oil prices seem to be stabilising on the higher side, a two per cent reduction on the jet fuel prices will hardly make any difference,” said Mr Amrit Pandurangi of Deloitte.
The extremely competitive nature of the aviation industry will make it difficult to bring down air fares, he added.
“It is the industry behaviour that determines the profit or loss of an airline company. If one airline reduces air fares, others have to follow suit. The benefit from the jet fuel cost reduction is minimal,” Mr Pandurangi said.
Even after the reduction, Aviation Turbine Fuel (ATF) prices are still considerably higher than a few months earlier.
In Mumbai, jet fuel will now cost Rs 66,587.90 per kilo litre (kl), against Rs 68,022.08 per kl. The three fuel retailers, Indian Oil, Hindustan Petroleum and Bharat Petroleum, revise jet fuel prices twice every month, based on the average international price in the preceding fortnight.
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