5% Price Cut for the ATF - Good News for the Airlines in India

In India the second consecutive month, there is good news for airlines. Oil marketing companies have reduced the prices of the fuel by close to 5%. The price of the commodity in Mumbai comes down from Rs 61,834.81 a kilolitre to Rs 58,479.37, a reduction of Rs 3,355.44. But travellers need not rejoice. Airlines are adamant they won’t reduce fares as they still haven’t got
the red out of their books.

Wolfgang Prock-Schauer, chief executive officer, Jet Airways, said, “The first priority for airlines is to get out of the red. ATF, even with the reduction in price, is 50% more expensive than it was last year. So, it is difficult for us to reduce fares.”

In fact, airlines have consistently said that they would have to raise the fares again before the festive season. The falling loads have meant that airlines are flying half-empty cabins. An airline seat is a perishable commodity. Should airlines look at reduction in fares to try and stimulate demand?

Jitender Bhargava, executive director, Air India, said, “When fuel prices were increasing month after month, airlines imposed surcharges, which was covering only a part of the additional burden. This is evident from the fact that all airlines continue to bleed. We will have to see ATF at much lower levels before reduction in fares can be looked at.”