Aviation stocks continue to languish despite airline companies seeing a significant drop in aviation turbine fuel (ATF), which constitutes 35-40% of the operating costs of any airline.

Financial planners say stocks of listed companies like Delhi-based low-cost carriers SpiceJet, Jet Airways and Kingfisher Airlines will gain momentum only in the ensuing financial year since the operators have to clear their dues to oil marketing companies and the Airport Authority of India (AAI) for using the airport infrastructure before they start making profits.

Airlines collectively owe oil companies Rs 4,000 crore as on January 15 and AAI, approximately Rs 3,000 crore.

Stocks of listed airline companies have dropped nearly 90% currently compared to last year. SpiceJet stock closed at Rs 12.60 on Friday compared to Rs 176 in February 1, 2008 on the Bombay Stock Exchange (BSE). Similarly Jet?s stock nosedived to Rs 158.50 compared to Rs 839 on February 4, 2008 . Kingfisher?s stock closed at Rs 31.60 as against Rs 206.70 in February 2008.

Says an industry observer, ?Following a drop in the ATF prices, airlines have reduced fares to attract passengers. The healthy load factors will bring in respite to the working capital needs of the airlines, but real benefits will be seen only after airlines are able to improve their financial health by settling their dues to various agencies like the AAI and oil marketing companies.? It may be noted that airlines have collectively made losses of Rs 2,000 crore in the previous financial year and losses are expected to double by this FY09.

Despite the fact that aviation turbine fuel has reduced 57% in January as compared to Rs 75,000 a kilolitre in August 2008, airlines are not able to make huge profits since they have slashed fares to lure passengers. Also, growth in infrastructure at airports is not at par with the growth in civil aviation. Moreover, landing and parking fees, when compared to other airports worldwide, are quite high.

?Once the infrastructure is adequate, the airlines will jump into black,? says a higher rung official from a Delhi-based low cost carrier who further adds that aviation stocks have not reached their fullest potential due to extremely volatile market conditions.