With global oil prices hovering steadily around $40 a barrel for the past several weeks, public sector oil companies have reduced prices of jet fuel for the second time in a fortnight and the eleventh time since September to bring it to the levels prevailing in 2005.
Effective from Saturday night, public sector oil companies reduced the jet fuel prices by a further 7 per cent or approximately Rs2,125 per kilolitre, making the fuel available at Rs27,106 per kilolitre.
Since yesterday, jet fuel price went down Rs2,052 per kilolitre to Rs.27,106 in Delhi, in Mumbai, where over 50 airlines, both international and domestic airlines operate and approximately 700 landings and take-offs take place everyday, the jet fuel prices has come down from Rs29,985 per kilolitre to Rs27,861 per kilolitre while in Kolkata the reduced price is still high at Rs34,847 and Chennai, Rs30,317 per kilolitre.
The jet fuel prices are revised by state-run oil companies in the beginning and middle of every month taking the preceding fortnight average international jet fuel prices, which has also registered a sharp decline.
But even with jet fuel prices coming down by over 60 per cent since August but comprising nearly 40 per cent of an airlines operating cost in India, domestic airlines are in no mood to reduce air fare as all of them want to recover the cost after amassing huge losses, fixing fares below cost in the battle for a declining market share.
In domestic air travel, a passenger is charged a hefty Rs3,000 as fuel surcharge and taxes although the base price of a ticket is a mere Rs1,000-Rs1,500.
In the past months, high fuel prices and the economic slowdown have combined to push losses of leading private airlines and have affected profitability of airlines, where it had have even led to defaults in payments of ATF bills by leading private players like Kingfisher Airline and forced Jet Airways and Kingfisher to join their operations to reduce costs.
The government, in October allowed domestic airlines, who had amassed a huge outstanding collectively at Rs2,962 crore to public sector oil companies for jet fuel, pay the outstanding in six monthly installments in order to help the cash strapped airlines cope with the global economic meltdown, which led to reduced passenger load.
The domestic traffic in the aviation sector has declined by 9 per cent in 2008 compared to the previous year and the average seat factor of passengers fling per aircraft has sharply come down to 63.7 per cent in January from 72.8 per cent in the same month last year.
Last month, all domestic airlines collectively withdrew all fare concessions and instead announce steep hikes in base air fares, which forced the minister for civil aviation, Praful Patel to came out strongly against the airlines, as the move amounted to cartelization. (See: Praful Patel warns airlines against cartelization)
The airlines defended the move and said the decision was taken because of the low load factor and all airlines were fighting for survival, so the move should not be seen as cartelisation.
With the dollar appreciating, private airport operators raising their charges, high taxes and the global economic meltdown, which has reduced passenger load has contributed to heavy losses to the airlines since the past seven months.
The IATA, that represents 230 airlines comprising 93 per cent of scheduled international air traffic, said that international air travel for January showed a deepening year-on-year demand slump as international passenger demand fell by 5.6 per cent in January 2009 compared to the same month in 2008. (See: Global economic downturn hits airline traffic worldwide)
Global airlines are set to post $2.5 billion in losses in 2009 as revenues are likely to shrink by $35 billion to $500 billion, said IATA.