Comments
The reduction in aviation turbine fuel (ATF) prices may not immediately translate into lower fares for Indian flyers as carriers will focus on reducing liabilities while cashing in on the upcoming holiday season.
Riding on the back of a steady fall in international crude prices, state-owned oil marketing firms have reduced the ATF price by 4.1 per cent to ₹59,943 a kilolitre from December 1.
“Many airlines are reeling under carry-forward losses and liabilities towards employees, lessors, lenders and suppliers. ATF prices in India will reduce with a lag effect since PSU oil companies may have contracted current supplies at a higher price. There is a risk that the downward trend in crude prices may reverse soon. So, we do not anticipate a significant reduction in air-fares,” said Amber Dubey, Partner and India Head of Aerospace and Defence at global consultancy KPMG.
With international crude prices falling to $70.29 per barrel, ATF rates have dipped below ₹60,000 per kilolitre for the first time in three years. Since August, ATF has become 14.5 per cent cheaper for domestic airlines ATF costs account for over 50 per cent of an Indian carrier’s operations. A senior official with an airline company said most carriers would continue to offer flash discounts to stimulate demand. However, he ruled out an across-the-board fare reduction.
“We have not come out of intensive care unit yet. Reduced fuel costs will put us on the path to recovery, but passing the benefits to customers at this stage will put us back into ICU,” the airline official, who did not wish to be identified, said.
Moreover, December and January are supposed to be among the better months for domestic carriers as more people fly in the holiday season. Hence, carriers are expected to continue with the current fare regime.
So, at what level will average flight fares fall in the future?
“International crude price needs to reduce to $60 a barrel. Then, we can start thinking of lowering fares,” the airline official said. For the year ended March 31, 2014, the country’s top five domestic airlines recorded combined losses of ₹9,737 crore because of soaring ATF costs and rupee depreciation.
Comments
COMMENT NOW
Comments
Comments have to be in English, and in full sentences. They cannot be abusive or personal. Please abide by our community guidelines for posting your comments.
We have migrated to a new commenting platform. If you are already a registered user of TheHindu Businessline and logged in, you may continue to engage with our articles. If you do not have an account please register and login to post comments. Users can access their older comments by logging into their accounts on Vuukle.