Reduce ATF costs to bring in savings: airline firms

Written by Shaheen Mansuri | Mumbai, Apr 8 | Updated: Apr 10 2008, 04:30am hrs
Plagued by escalating fuel prices, airline operators, who are also members of the Federation of Indian Airlines (FIA), have said that a reduction of even Rs 1,000 per kilolitre on jet fuel will translate to a saving of Rs 500 crore for the sector.

It may be recalled that FIA, formed by all scheduled air carriers in India, has been taking up the issue of high aviation turbine fuel (ATF) prices with the government since its inception in 2006.

Hitesh Patel, executive vice-president, Kingfisher Airlines told FE, Currently, the sector is bleeding due to the high cost environment, especially due to the exorbitant jet fuel prices which constitute 50% of the operating cost for any airline. If there is a uniform sales tax structure on the fuel across the country, airlines will save over 60%, which is closer to international benchmarks.

GP Gupta, chief financial officer of GoAir said that the airlines should lobby with the government to rationalise ATF prices. Reduced prices will help lower the industry's operational losses by over 25%, said Gupta. In the previous fiscal, the airlines collectively posted losses of Rs 2,000 crore. Comparing the situation with South Asian carriers, an FIA member explained that Indian carriers are currently buying ATF at Rs 38,000 per kilolitre, while international carriers in Singapore or Hong Kong are paying approximately Rs 21,000 for the same quantity, which is about 73% lower than the Indian carriers.

The FIA representative also pointed out that since April 2005 till date, crude prices have registered a net increase of 17%, while oil companies have passed on a net increase of 31.6% to the airlines. The government should fix a base price for ATF and a common distribution infrastructure, he said, adding, that to sustain current levels of expansion in the sector, rationalising the taxes is the only key.