Jet fuel prices cut 12.5%, but airfares to stay unchanged

State-run oil marketing companies have slashed aviation turbine fuel (ATF) prices by 12.5 per cent on Thursday, bringing jet fuel prices to a four-year low, raising hopes of cheaper flights in the days ahead.

ATF rate in Delhi stands reduced by 12.5 per cent, or by approx Rs7,500 per kl. ATF, which accounts for 40-50 per cent of an airline's operating cost in the country, will now cost Rs52.4 a litre in Delhi.

The price reduction will help airlines but is unlikely to lead to cheaper flying, but airlines are unlikely to cut fares proportionately. However, this should make travel cheap in the upcoming lean travel period.

Cash-strapped airlines, including the embattled SpiceJet, do not see any chance of a price reduction, at least in the near future.

SpiceJet has cancelled 115 flights a day as many of its Boeing 737s have been taken back by lessors due to non-payment of rentals while other airlines are cashing in on the resultant seat crunch, sending their fares zooming during the winter peak.

Also, as most airlines argue, airfares have never been in tandem with fuel prices as fares have been falling even when oil prices were at their peak. The airlines are suffering from that mismatch and most airlines are struggling to avoid a shutdown.

However, if ATF prices remain subdued or fall further over the long term, airline officials say, there is a chance of a fare reduction.

"ATF rate per KL in Delhi today reduced 12.5%, or by approx Rs7,500 per KL. Much needed relief given high cost of operations in India," SpiceJet COO Sanjiv Kapoor tweeted.

ATF price was last cut by 4.1 per cent, or Rs2,594.93 per kl, on 1 December 2014. The prices had hit an all-time high of Rs76,241.33 per kl last January but have since been reduced.