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Oilcos to cut aviation fuel prices by 6%

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Joined: 24 Dec 2006
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PostPosted: Tue Jan 30, 2007 11:06 am    Post subject: Oilcos to cut aviation fuel prices by 6% Reply with quote

TUESDAY, JANUARY 30, 2007 02:11:59 AM

MUMBAI: In A move that could improve airline companies’ bottomlines, oil firms has decided to cut aviation turbine fuel (ATF) prices by about 6% from February 1. The base price of the fuel is likely to be revised to Rs 2,091/KL, based on the average Arab Gulf price through January.

However, initial reports suggest that the airlines are unlikely to pass on the benefit to passengers who are currently paying about Rs 650 as fuel surcharge and Rs 150 as congestion charge.

Domestic carriers say that the prices are still too high and that they have not yet recovered losses made due to high fuel costs.

Oil traders say, aviation fuel prices in the month have softened, but not to the extent of crude oil which fell to below $60/bbl. The price is set by three public sector oil companies — IndianOil, Bharat Petroleum and Hindustan Petroleum —, which control the aviation fuel supplies to airports across the country. It is benchmarked to the Arab Gulf ATF prices which fell to $67/bbl from about $75/bbl in the beginning of the month. Oil companies are also likely to announce a cut in naptha and furnace oil prices in line with international prices.

Meanwhile, international carriers have begun to cut the fuel surcharge in response to the falling fuel prices. Singapore Airlines, on Monday, announced a cut in its fuel surcharge. On long haul routes, the charge has been reduced to $78 per passenger from $82 per passenger.

This is the second time the surcharges have been reduced; the first was in October 2006. The airline says collections from the fuel surcharges have only given a partial relief from the cost increase as a result of the high price of jet fuel. Surcharge levels had reached new highs earlier last year and amounted to about 50% of the ticket costs in some cases.

Fuel costs have risen to almost 30% of the total operating cost for airlines and margins have been impacted by hardening prices. In India, only Jet Airways and Air India are allowed to hedge their ATF purchases. Even Jet is allowed to take an exposure only to the extent of its international uplift of fuel.


Somebody care to explain why Jet and AI are the only ones allowed to hedge?
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