Aviation fuel prices dip on crude cut

Public sector oil companies have cut aviation turbine fuel (ATF) prices by 1.85 per cent. This is expected to help Indian carriers pare their costs by about one per cent.

The ATF price cut comes after the international crude oil price fell to $55.41 a barrel on Monday""down 11.74 per cent from its all-time high of $62.78 a barrel on September 1. The average price of the Indian crude oil basket in October was $56.28 a barrel compared with the average price of $59.74 in September.

But air fares are not likely to come down, as jet fuel prices have been rising since May this year. Airlines are of the view that the cut in prices is too little for them to pass on to consumers, especially after a series of price increases over the last six months.

In the last two months alone, ATF prices have gone up twice, 10 per cent on each occasion. According to Indian Airlines executives, the state-run carrier is not planning any reduction in ticket prices.

"We had not increased fares the last two times, when the ATF prices went up. We had absorbed the cost. The reduction is marginal for us to pass on to customers," said an Indian Airlines executive.

Similarly, budget carrier Air Deccan is also not cutting fares. "We had not added the fuel surcharge when fuel prices went up. We will not cut fares,' said an executive with Air Deccan.

'The net savings that we make are minimal. We are not considering a cut in ticket prices now,' said Ajay Singh, director, SpiceJet. For SpiceJet, which imposed a Rs 500 fuel surcharge last month, the fuel bill accounts for nearly 35 per cent of its expenditure.

The shares of Jet Airways, which opened at Rs 1,027 today, closed at Rs 1,099.65 after hitting an intra-day high of Rs 1,100. SpiceJet shares also moved up and closed at Rs 73.35, after opening at Rs 68.50 and hitting a high of Rs 74.

The slash in ATF prices for domestic airlines ranges from Rs 650 a kilolitre to Rs 745 a kilolitre. The new prices came into effect from yesterday. For international airlines, which do not have to pay local levies on the fuel, the cut will be about $25 a kilolitre.