For the aviation sector that has been reeling under losses for quite sometime, there seems to be a thin ray of hope. Despite the airlines flying in the red on account of high operating costs, their scrips are recovering on the Bombay Stock Exchange (BSE) this month.

Analysts with whom FE talked have pinned hopes on aviation turbine fuel (ATF) getting a ‘declared goods’ status. That will result in ATF attracting a uniform tax of 4% across all states. If the ATF cost is brought down, carriers can curtail their operating costs. ATF cost comprises 40% of the operating costs of an airline operator.

Private carrier Jet Airways’ shares traded at Rs 261.60 on Friday compared to an all-time low of Rs 115. 25 on March 12, 2009. Similarly, Kingfisher Airlines, which posted a net loss of Rs 1,608 crore in FY09 and had fuel expenses of Rs 2,602 crore during the year, also witnessed a northbound movement in its scrip at Rs 50.10 on Friday compared to an all-time low of Rs 22 on November 20, 2008. Low-fare carrier, SpiceJet, is also following the footsteps of its peers on the BSE and its scrip escalated 150% at Rs 22.65 on Friday against a meagre Rs 9 on October 7, 2008.

Shares of all the three airlines also did better than their week-ago closes. Jet Airways shares had closed at Rs 242.30 on August 7, while Kingfisher stood at Rs 46.60 on that day. SpiceJet shares had closed at Rs 18.95 on August 7.

Said an analyst from a financial services firm, “Last year, crude oil prices hovered around $140-$147 a barrel in August and thereon. High crude oil prices and diminishing load factors translated into losses for the carriers. Flag carrier Air India posted losses at Rs 7,200 crore for FY09, while Jet suffered losses of Rs 961 crore. This dampened the spirit of investors. This year, crude oil prices have averaged at around $50 a barrel and carriers are trying to cut costs to match fare reductions. Scrips gaining momentum could be a temporary trend before the second quarter results are announced.”

According to DGCA, January-July 2009 passenger traffic of scheduled carriers dipped 5% at 247.48 passengers from 260.30 in the year-ago period. Air India has introduced 27% of its flight in the winter schedule in the low-fare category, Air India Express. Similarly, Jet has brought down its fares by 15-20% on its new low-cost service, JetKonnect, on certain routes. Carriers who have traditionally been operating on low-cost model like SpiceJet, GoAir and Indigo are also offering fares at competitive rates to improve yields and revenues per kilometers flown.