ATF price cut, but airlines mum on fare reduction

Even after two successive steep cuts in aviation turbine fuel (ATF) prices in the space of 30 days, airlines have not reduced fares so far and are tight-lipped on their next move.

In a new year bonanza to airlines, the oil marketing companies cut ATF prices by a sharp 14.7% on Tuesday. This came after a reduction of about 11% on December 1.

The move has raised expectations that the aviation industry will return some of its gains to flyers, but when DH contacted some private airliners, they said they were not in a position to comment as there was no decision so far.

Air fares have increased by close to 30% in the past three months since September and travel agencies are hopeful a sharp cut in ATF should translate into drop in prices of air tickets.

However, aviation experts are of the view that the airlines have been bleeding due to their high operating costs in the past many months and the latest cut in ATF prices may or may not translate into air fares coming down.

Tuesday’s price cut was Rs 9,990 per kilolitre on ATF. This came on the back of a Rs 8,327 per kilolitre cut last month. With the latest reduction in prices, ATF is now selling at Rs 58.06 per litre, which is cheaper than petrol at Rs 68.65 per litre in Delhi and diesel at Rs 62.66 a litre. Even non-PDS kerosene is more expensive than ATF in cities like Mumbai.

Market participants, however, said the scenario for airline industries has changed since November after jet fuel prices came down and rupee regained its losses. Prior to that, most of them were expected to plunge into deep losses in the financial year ending March 31.

The weak rupee added to the woes of the airlines as most of their expenses are dollar-denominated, but an appreciation in currency has reduced that fear, an aviation expert said.