Although crude oil prices have come down to levels of $50 a barrel currently, airlines hope to post better results only by the end of the current financial year. Private carrier Jet Airways has seen a drop of 40% in its fuel bills in the past few months.
The carrier, which has the largest market share in terms of load factors, had a fuel bill of over Rs 300 crore (on a monthly basis) when crude oil price was at its peak at $147 a barrel in August 2008. Similarly, Nacil (National Aviation Company of India Ltd), which runs national carrier Air India, has saved Rs 46 crore in the past six months on account of lower aviation turbine fuel cost. Mumbai-based low fare carrier, GoAir which had a fuel bill of Rs 32-35 crore before crude prices started declining, also has a reason to rejoice with its fuel bills plummeting to nearly Rs 23 crore.
However, before breaking even, airlines have to clear their dues of nearly Rs 4,000 crore with oil marketing companies against purchase of aviation turbine fuel and over Rs 2,000 crore with the Airport Authority of India (AAI) towards airport usage fee. Airlines also have procured loans from banks for purchase of aircraft, which they have to repay.
Says an executive from Jet Airways, ?The impact of lower fuel bills will be reflected in the last quarter of financial year 2009-10.? He added that once passenger demand starts picking up and dues are paid, the sector will fly into black. According to industry observers, airlines are collectively expected to post losses of Rs 10,000 crore in the financial year 2008-09.
However, an analyst from IL&FS Investsmart adds, ?There has been a huge plunge in travel demand, particularly from higher-fare-paying business travellers. There is already a 20% drop in passenger traffic accompanied by nearly a 10% cut in capacity by the airlines.? He further adds that the sector is facing a cycle of bust currently.