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.”

Civil Aviation Agreement Signed in EU-India Summit

A Horizontal Aviation Agreement was signed at the EU-India Summit in Marseille,which will restore legal certainty to the bilateral air services agreements between India and EU Member States and reinforce EU-India aviation relations.

The Vice-President Antonio Tajani said, “The agreement signed today is good news for Indian and EU airlines and passengers as it removes the legal uncertainty from the bilateral air services agreements. But equally important, it represents a very significant step forward in strengthening our relations with India and in opening up new areas of cooperation. India is an important partner for Europe[1] and is one of the world's fastest growing aviation markets. The EU and India have much to gain from closer cooperation in this sector. This agreement is a further tangible result of the EU-India strategic partnership. I expect the cooperation in aviation to deepen much further in the coming years in a range of areas such as regulatory and technical cooperation.”

The horizontal agreement will restore legal certainty to the 26 bilateral air services agreements that India has with individual EU Member States by bringing these into conformity with Community law[2]. It will thus create a sound legal basis for further developing EU-India air transport relations and cooperation in the future.