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Fall in jet fuel prices may not alter fares
Published on 17 Jul. 2010 12:41 AM IST
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Softening of the prices of jet fuel, better known as the aviation turbine fuel or ATF, is not likely to translate into a cut in airfares. State-owned oil firms on Thursday cut ATF prices by over 3% on the back of easing international oil rates, but airlines said they will not cut fares.
According to Economic Times, in Delhi, jet fuel rates were slashed by Rs 1,390 per kilolitre to Rs 40,099 per kl, in Kolkata it was cut by Rs 1,467 a kl to cost Rs 48,460 per kl, in Mumbai the rate was brought down by Rs 1,448 a kl to Rs 41,361 per kl, while in Chennai it was decreased by Rs 1,508 per kl to Rs 44,334 a kl, a senior Indian Oil Corporation official said. Fuel costs make up for roughly 40% of the operating cost of an airline, with Thursday’s cut easing the burden on Indian carriers.
When contacted, a spokesperson from the low-cost carrier SpiceJet said, “When the ATF prices rose for so many consecutive times in the past, we absorbed it. Now I don’t think we are going to slash airfare.”
ATF prices have risen on eight instances since March, with exception of two occasions, when rates were lowered. National carrier Air India also said that it is not likely to cut airfare after the new ATF prices become effective from July 16. “We’ll examine the impact of the fuel cut and then take a decision,” Kingfisher Airlines said when asked if they would examine a cut in airfares in tandem with the decrease in the jet fuel.
According to global aviation consultancy and research firm, Centre for Asia Pacific Aviation, Thursday’s cut in ATF prices is too low to merit a dip in airfare. “It is a marginal decrease. Moreover, July-August is an off-season when airlines come up with attractive (lower) fares. They can’t slash airfare on top of that,” CAPA South Asia CEO Kapil Kaul said.
The reduction in jet fuel price in Delhi negates the 3.2% or Rs 1,297 per kl hike in prices that oil firms had announced from July 1. The basket of crude oil India buys averaged $72.8 a barrel in the first fortnight of July, based on which Thursday’s cut in ATF price was decided, against $75.74 average of second half of June, the official from the oil company said.
IOC and its sister PSU fuel retailers, Hindustan Petroleum and Bharat Petroleum, revise jet fuel prices on the first and the 16th of every month, based on the average global oil price in the previous fortnight.

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