SpiceJet shelves fuel import plan

Adith Charlie Mumbai | Updated on August 17, 2014 Published on August 08, 2014

Budget carrier SpiceJet has shelved its plan to directly import Aviation Turbine Fuel (ATF) citing operational challenges.

“We did a proof of concept last year and then decided to put the idea on hold. Theoretically, importing ATF is a great opportunity to reduce fuel costs but we do not think that we are still ready for it yet,” a SpiceJet spokesperson told Business Line.

SpiceJet, which is promoted by billionaire Kalanithi Maran, had become the first Indian carrier to receive approval from the Director General of Foreign Trade (DGFT) to import ATF in 2012.

The intent then was to eventually import 15 per cent of the fuel requirement. Importing ATF would also help the airline save sales tax on jet fuel, which accounts for almost half of a carrier’s operating costs.

However, importing is logistically challenging because the carrier has to assume full responsibility of importing and storing ATF in India, according to the spokesperson. Given that SpiceJet has a fleet of over 50 aircraft, its fuel requirements would call for fresh investments in infrastructure, analysts said. Currently, carriers procure fuel from state oil marketing companies who import crude, process it locally and distribute it to airlines across the country. This requires infrastructure such as storage tanks and pipelines, as well as trucks and tankers.

“We may revisit the idea of importing ATF at a later stage,” he added.

It may be recalled that SpiceJet had reported a loss of over ₹1,000 crore last fiscal which is five times higher than its 2013 loss.

The management has been in discussions with various parties for infusion of funds. The company is silent on when the carrier would return to operational profits as the company is in a silent period ahead of its quarterly results announcement later this month.

However, he denied recent news reports that draw a parallel between SpiceJet and Kingfisher Airlines. The latter was grounded in 2012 under the weight of heavy debt and accumulated losses.

“We have been paying salaries on time and our fleet is being optimally utilised. We are definitely not another ‘Kingfisher’ in the making,” he said.

Published on August 08, 2014

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