Airfares unlikely to reduce even after 12.5 percent drop in jet fuel price
The New Year is witnessing the highest cut down in aviation turbine fuels (ATF) prices. Oil companies are reducing the prices by 12.5%. ATF prices are at a four year low price with Rs. 52.4 per liter. This is obviously a good news for airlines as approximately half of the operating costs are for fuel. However, there is very less chances that the prices for airline tickets will reduce.
The reason for this is that 115 flights a day have been cancelled by cash strapped SpiceJet. Many of its Boeing 737s have been repossessed by leasers due to non-payment of rentals. This led to a seat crunch which made airlines increase their prices to a peak. The situation got to a point where the aviation ministry had to cap the maximum fare to Rs. 20,000 on domestic sectors.
Some airline officials say that the fare cuts can only be considered if the ATF prices remain so low constantly. For Indian airlines, jet fuel costs comprise of 40 to 50 % of operating costs. The ATF for domestic flights here in India is the costliest in the world. This price reduction seems to be only of help to the airlines but not to travelers as the fares might not reduce.
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