ATF price cut today, but no cheer for travellers

Mumbai, Sept 29 | Updated: Sep 30 2006, 06:28am hrs
In what could bring cheer to the airline industry for the first time in eight months, aviation turbine fuel (ATF) prices are set to drop 6-7% (between Rs 2,500 and Rs 3,500 per kilolitre). Oil marketing companies are likely to announce the price cut on Saturday.

The move is in line with the recent fall in global crude oil prices. In the last eight months, ATF prices have climbed almost 27% to Rs 49,610 per kilolitre, severely denting the bottomline of airlines.

However, flying in the domestic skies may not get any cheaper. Despite the proposed reduction in ATF prices, airlinesboth low cost carriers and full service carriersdont intend dropping fares as they hope to recoup the heavy losses suffered earlier.

No reduction is planned in fuel surcharge which is currently at Rs 750, airlines sources said. SpiceJet director Ajay Singh said, We are not considering a reduction in fuel surcharge since we have been absorbing the jet fuel price hike for the last eight months. Just last month, surcharge was raised Rs 100 to Rs 750.

According to Air Deccan chief operation officer Warwick Brady, The rationale of not reducing the fuel surcharge despite a decline in the ATF price is justifiable. We have to be compensated for the loss made when ATF was rising and there was no surcharge levied to absorb the hike.

Flying Low

Aviation turbine fuel prices to drop 6-7%
But airlines dont intend to drop fares
No reduction planned in fuel surcharge

Industry experts are of the view that the lower fares offered by domestic carriers are already exerting pressure on the yields. Hence, a reduction in ATF prices sans no reduction in fuel surcharge would provide the required respite for airlines.

Civil aviation minister Praful Patel has assured that he would talk to the petroleum and finance ministries to reduce ATF taxes, which ranged from 8% to 24% across states. ATF taxes are the highest in the world in India, mainly due to high duties. ATF accounts for 47% of the operating cost of low cost carriers and 35% for full service carriers.