Eased ATF wont bring down airfares: experts

Written by Shaheen Mansuri | Mumbai, Nov 19 | Updated: Nov 21 2008, 05:23am hrs
Not just lower aviation turbine fuel (ATF) prices, even the governments proposal to notify ATF as a declared good will not have an immediate impact on air fares, say industry experts. Although some carriers have said that if the government would provide declared goods status for ATF, they would immediately cut air fares, experts say most airlines have posted losses in the second financial quarter and are trying to improve business visibility at this point of time.

Says an expert working with a reputed financial services company, Aviation is an industry characterised by intense competition and high cost structures. Even if the government announces easing of ATF tax load, airlines will have to balance their revenues and costing. Airlines will certainly be at an advantage as ATF contributes nearly 45% of their operating cost, but they have to first clear their dues to the AAI and oil marketing companies. It will take a while for airlines to slash fares. It may be noted that airlines are currently looking at strategic benefits by bringing noticeable changes in the areas of revenue generation (on profit-making routes) and cost savings by discontinuing on loss making routes.

ATF price for November has come down by 12% compared to October 2008. Currently in Delhi, jet fuel price has come down to Rs 39,380.51 per kilolitre as compared to Rs 55, 585 per kilolitre in October this year. In Mumbai, it has come down to Rs 40,687.42 per kilolitre as against Rs 46,518.85 per kilolitre, yet fares have not been lowered by airlines.

An executive from a Mumbai-based full service carrier opines, We will look at the economic viability before taking any decision on reducing fares. As the peak winter season begins, carriers will utilise this opportunity to make up for their losses before they decide to slash fares.