ATF Price Cut to Help Airline Companies

Airline companies in India received a much awaited relief after oil companies reducing the prices of aviation turbine fuel (ATF).

ATF prices were reduced to Rs 59,943 a kilolitre from December 1, 4.1 per cent lower than the previous month. Domestic airlines' fuel bill in the second half of 2014-15 is estimated to come down by a combined Rs 1,200 crore.

ATF for domestic carriers has become 11.22 per cent cheaper since October and is expected to see more price cuts in the next three months. According to estimates by the Centre for Asia Pacific Aviation (Capa), fuel costs could fall by an average 15 per cent in the January-March period.

Since ATF accounts for over 50 per cent of domestic carriers' operating costs, this implies a substantial six per cent fall in their costs during the period. Airlines had bought Rs 18,674 crore worth of ATF for domestic flights last financial year.

For SpiceJet, Jet Airways and Air India, the price cut would mean a substantial reduction in losses. SpiceJet, for instance, had a fuel bill of Rs 3,252 crore in 2013-14. If it consumes the same amount of ATF as last year, it would save around Rs 200 crore on fuel cost in the October-March period. That would help it reduce its losses (Rs 1,003 crore last financial year).