Demand for jet fuel fails to take off despite price cuts

MUMBAI: Three consecutive cuts in prices have failed to jack up jet fuel demand in the country. This perhaps reconfirms the slowdown in the domestic aviation industry as a result of global economic downturn.

The demand for aviation turbine fuel (ATF), which comprises 50% of the operational cost of an airline, has fallen by over 5% to 0.37 million tonnes in November compared to a year-ago period, according to the provisional data on the petroleum products sale in the country. This is despite a sharp reduction in ATF prices by 30% - from Rs 56,447 per kilo litre in October to Rs 39,380 per KL in November 16 - in three tranches. Industry experts attributed the fall in demand for jet fuel to capacity cut by the bleeding airlines.

However, demand for petroleum products rose by 1.6% in November to 10.9 MT. As per the provisional petroleum products sales data, sales of ATF and compressed natural gas (CNG) declined in November, while that of petrol, diesel, LPG and naphtha increased.



Plunging domestic air traffic has hit a record low in November with 21.3% fall in air passengers to 30.48 lakh during the period compared to a year-ago period. This is the largest single-month fall registered in the past few years. For the 11-month period ended November this year, domestic traffic slipped by 3.9% to 37.6 million.

Industry experts predicted that December would repeat a similar trend. In that case, domestic traffic for the calendar year could see a 5% fall compared to last year. This is despite a decision taken by the oil marketing firms to reduce the ATF prices by another 11% from Tuesday. The revised ATF prices will be Rs 32,691 per KL in Delhi, Rs 40,823 per KL in Kolkata, Rs 33719 per KL in Mumbai and Rs 36,436 in Chennai.