State-owned refiners such as Indian Oil Corporation (IOC) today reduced aviation fuel prices by 6.8 per cent compared to a fortnight ago following a dip in oil prices and appreciation of rupee.
Crude oil prices have fallen around 3 per cent and the rupee has appreciated by 3.2 per cent against the US dollar this fortnight compared with the previous fortnight. This has driven down aviation turbine fuel (ATF) prices to its lowest since June 2005, data on IOC’s website showed.
Oil companies revise ATF prices every fortnight on the basis of the average international prices in the previous fortnight.
The lower ATF prices, which have dipped over 57 per cent from its peak in August this year, will help reduce costs for the country’s airlines, which have already begun cutting fares. However, the carriers which have already announced fare cuts are unlikely to cut rates further.
“We have already announced prominent fare cuts and are not going to announce any more at least in the short-term. The fuel surcharge as of now remains untouched,” said Sanjay Aggarwal, CEO of low cost carrier SpiceJet.
Domestic carriers announced cuts ranging from 40 to 80 per cent in the basic fares, which in effect leads to a 25 per cent cut in overall fares. Low-cost carriers also announced special basic fares of Rs 99 across sectors.
ATF accounts for around 40 per cent of the total operating cost of airlines. At its peak, ATF costs accounted for up to 50 per cent of operating costs, putting the finances of the airlines under pressure.
Aviation fuel prices have dipped 33 per cent since January this year after rising over 50 per cent between January and August this year.
However, with a 10-15 per cent decline in passenger traffic estimated for January 2009, industry experts are doubtful whether airlines will be able to generate enough traffic to make use of the benefits as a result of the fuel price cuts.
