November 29, 2020

As airlines struggle to survive, jet fuel price hiked by over 5%

Date :  Nov 1, 2018, 15:49 IST

Sources : timesofindia.indiatimes.com

NEW DELHI: Oil companies on Thursday hiked the price of aviation turbine fuel (ATF) by 5.2 per cent, in yet another blow to India’s struggling-tosurvive airlines. The price per kilolitre (kl) of jet fuel after the latest monthly revision in Delhi, India’s busiest airport, will be Rs 76,378.8 up from Rs 72,605. In Kolkata, ATF will cost Rs 81,441.06 per kl – crossing the Rs 80,000-mark for the first time since July 2014.

While ATF prices are now at over four-year high, airlines are bleeding due to the rupee crashing before the US dollar. Most of airline costs are dollardenominated like aircraft rentals, foreign bases, expat pilot pay and maintenance contracts and their costs in rupee terms have sharply rises.

While these things are not in airline hands, Indian carriers claim they are unable to charge fares reflecting higher costs due to stiff competition. However, spot fares have started rising in recent weeks. Airline comments were awaited on what impact the latest ATF price hike will have on fares.

Rating agency Crisil on Thursday said airlines will need to hike fares by 12 per cent to offset the double blow of rising oil prices and falling rupee. It said Indian airlines are staring at steepest losses in a decade.

“Higher fuel costs and currency losses are expected to push airlines deep into the red this fiscal, reversing a three-year joyride. At an estimated Rs 9,300 crore, the industry’s losses at EBIT (earnings before interest and tax) level would surpass the Rs 7,348 crore blow it was dealt in fiscal 2014. That was followed by three good years through fiscal 2018, when carriers reeled in aggregate profit of Rs 4,000 crore on average at the EBIT level,”a Crisil statement said

The current situation is seeing at least two airlines – Jet Airways and Air India – struggling to survive. Jet is yet to pay 75 per cent of September and 100 per cent of October salaries to its pilots, aircraft maintenance engineers and senior management. The airline has got notice from some aircraft leasors due to default and delay in payment of rentals. AI fuel supply was threatened to be cut last month at some airports because of dues, something averted when the airline paid some money to oil companies.

The health of the companies is also perilous. IndiGo, India’s only consistently profitable airline so far, reported its first ever quarterly loss after listing three years ago for the July-September, 2018, period.

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