Mumbai, June 1:
The two per
cent cut in jet fuel prices on Thursday will have little impact on airline
companies, analysts say. Fuel accounts for 40 per cent of airline companies'
expenditure.
Passenger fares
are not headed down for now. “The aviation sector is reeling under losses. And
in such a scenario, it will be difficult to bring down the fares. Airlines
would use any dip in fuel price to consolidate their profits,” an official of
an airline company said.
Aviation
analysts feel that the difference would be minimal. “Since international oil
prices seem to be stabilising on the higher side, a two per cent reduction on
the jet fuel prices will hardly make any difference,” said Mr Amrit Pandurangi
of Deloitte.
The extremely
competitive nature of the aviation industry will make it difficult to bring
down air fares, he added.
“It is the
industry behaviour that determines the profit or loss of an airline company. If
one airline reduces air fares, others have to follow suit. The benefit from the
jet fuel cost reduction is minimal,” Mr Pandurangi said.
Even after the
reduction, Aviation Turbine Fuel (ATF) prices are still considerably higher
than a few months earlier.
In Mumbai, jet
fuel will now cost Rs 66,587.90 per kilo litre (kl), against Rs 68,022.08 per
kl. The three fuel retailers, Indian Oil, Hindustan Petroleum and Bharat
Petroleum, revise jet fuel prices twice every month, based on the average
international price in the preceding fortnight.
http://www.thehindubusinessline.com/todays-paper/tp-economy/article3481006.ece
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