SpiceJet to ship in fuel from Singapore; first Indian airline to directly import ATF

NEW DELHI: Low-cost carrier SpiceJet is all set to become the first Indian airline to directly import aviation turbine fuel (ATF) or jet fuel. The airline will ship in consignments of ATF from Singapore to two south Indian ports and then send them by trucks to airports wherever logistically possible. The move comes as ATF prices for domestic flights are currently at an all time high and SpiceJet — which spends about Rs 200 crore a month as fuel expense — expects substantial saving through direct imports.

"We will know the exact savings after one or two cycles of ATF import. Before that I would not like to hazard a guess. The average sales tax levied by states on jet fuel is 24% and the maximum saving could be that percentage," SpiceJet CEO Neil Mills said, adding that the process would begin as soon as the airline gets one final clearance from the government. Initially, the airline wants to meet 25%-30% of its demand through import.

"In July, August 2008, crude was at $150 and the exchange rate was Rs 38 to a dollar. At that time, ATF prices were the highest. Now, crude is at $113 but rupee is down to Rs 56 to a dollar and jet fuel is costliest ever. Apart from that, oil companies price ATF 10%-15% higher than what the price should be hiked proportionately. Then there is sales tax that averages at 24%. All these factors together means a tough cost environment for airlines," Mills said.

What's worse, airlines point out that India exports over half of the jet fuel here and a substantial part goes to the Gulf. Still, Indian carriers are looking at direct import. "After the latest hike, our fuel bill has gone up 7.7% or by Rs 50 lakh a day. The cost environment is getting progressively worse instead of improving," said Mills.