ATF slips to 16% but airfares remain

It’s a relief time of all domestic airline companies as state run oil firms have slashed down the Aircraft Turbine Fuel (ATF) charges by an average of 16% from Sunday Midnight. However, the airline companies don’t seem to restore the airfares, as per sources, none has yet announced to reduce the base ticket prices.

The state run oil firms such as Indian Oil, Bharat Petroleum and Hindustan Petroleum on the back of sliding prices of crude oil in the international market have reduced the ATF prices by 16% on Sunday. The ATF cost 40% of total flight operation in India for the domestic airline companies as states levy higher taxes on it.

The ATF prices in Delhi has been slowed down to Rs. 11,378.19 per kilolitre (kl) to Rs. 59,650.07 per kl, while in Mumbai, it would cost Rs. 11,838.75 per kilolitre less at Rs. 61,834.81 per kilolitre and in Kolkata, it has been reduced Rs 11,757.57 per kl to Rs 69,005.90 per kl.

For international airlines, which escape from paying local taxes that is seven times high in India in comparison to Singapore domestic market, the prices would slow down by USD205 per kl.

Despite of this reduction, no domestic airlines including the public sector airline ‘Indian’ has so far announced to revise the airfare on the parity of ATF revision.

Arguing on this move, the airlines officials have said that this slowdown held due to the volatility of the market and since next two-three months, the fuel prices is unlikely to be constant. Whenever, it would be stable, we would consider passing this reduction to the passengers.

Commenting on this, the Chief Executive Officer of Jet Airways– India’s largest private sector air company Wolfgang Prock-Schauer has said, “For the time being, we don’t want to change our pricing strategy. We want to see the medium-term development of ATF prices before taking a call. Even with this decrease, prices are significantly above the levels seen a year ago.”

While Civil Aviation Minister who is liable for public sector airlines Indian and Air India, has said that all domestic airlines companies have suffered hefty losses and it is unlikely they (the airlines) may immediately restore their airfares. This revision will help them only cutting their losses.

According to sources, the price of ATF has gone up by six times this year and thus it is not likely to slip down the airfare prices as domestic airlines companies are operating their business despite of heavy losses. According to aviation stats, domestic airlines have cost a staggering loss of Rs. 4,000-crore in the last fiscal, while in the running it is expected to go up to Rs. 10,000-crore this year.

Due to this price hike, domestic airlines have also lost the numbers of passengers in this fiscal and as much as an average of 12% of passengers have been cut down in each airlines July. The low budget airlines such as Deccan (now Kingfisher Red) and SpiceJet are among worst affected.

‘There had been a drop of only 7 to 8 per cent of discretionary passengers because of the continued hike in ATF prices and were passed on to passengers from time to time. Now as we are entering the peak season, we hope that they will return to the aviation sector,’ said Partha Sarathi Basu, the Chief Financial Officer of SpiceJet.