Jet hit by ATF prices, to fork out additional $6 m/month
NEW DELHI: Domestic carriers are feeling the heat of spiralling fuel price. Country’s largest private airline Jet Airways is set to incur additional expenditure of about $5-6 million per month on account of the recent hike in aviation turbine fuel...
By Nirbhay Kumar, |
NEW DELHI: Domestic carriers are feeling the heat of spiralling fuel price. Country���s largest private airline Jet Airways is set to incur additional expenditure of about $5-6 million per month on account of the recent hike in aviation turbine fuel (ATF) prices. Jet CEO Wolfgang Prock-Schauer said aviation industry would fork out an additional $30 million per month due to the price hike effected by oil companies in April. The Naresh Goyal-owned airline consumes one-fourth of the total fuel used by airlines in India.
���Last hike in the ATF has led us to carry an additional financial burden of $5-6 million every month. The impact of high jet fuel price would definitely have an impact on our financial results,��� Mr Prock-Schauer said on the sidelines of a seminar on aviation safety.
Due to a rise in global crude oil prices, oil marketing companies such as IOCL, HPCL and BPCL hiked ATF prices by 14% early this month. Global crude oil price has touched $112 per barrel mark now, up nearly 60% compared to about $65 per barrel last year. Increase in oil price has become a monthly affair and airlines are passing on some of the burden to passengers.
���Some carriers have priced their tickets irrationally to fill additional seats. There is imbalance between input cost and demand, creating too much competition. It���s time to reduce input cost. The year 2008-09 is going to be very challenging year for the domestic aviation sector,��� he added.
The total combined loss of domestic carriers in 2007-08 is estimated to about $1 billion, mainly on account of high fuel cost. Since aviation is considered an elitist service, states levy very high sales tax on jet fuel price. The overall state tax on ATF is about 41%. The fuel accounts for 40% of an airline���s operating cost. According to industry estimates, ATF is priced 70% higher in India as against international benchmarks.
High fuel cost has made operation of bigger aircraft such as Boeing 737 and A320 on smaller routes almost commercially unviable. Jet Airways plans to induct 6 ATR by December so that it may replace bigger aircraft with it on short-haul routes. Low-cost carrier SpiceJet has already either reduced frequency or withdrawn service on many shorter routes.
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���ATRs have advantage of consuming lesser fuel. We would deploy these aircraft on sectors such as Ahmedabad-Indore and Mumbai-Pune,��� a Jet executive said. The Mumbai-based airline is also planning to go slow on expansion in the domestic market.Start a SIP with as low as ₹500 with ET Money App!
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