India’s beleaguered aviation sector has received a shot in the arm with Aviation Turbine Fuel (ATF) prices being slashed by a massive 14.7 per cent or Rs 9,990 on the first day of the year following a decline in international markets, reports The New Indian Express. The price now stands at Rs 58,060.97 per kilolitre (kl) in New Delhi, which means that it is effectively cheaper than petrol as well as diesel.
This is now the second consecutive month of ATF price reductions, with this most recent cut being the largest yet.
Analysts expect this cut coupled with the rupee’s recent appreciation against the US dollar, to provide a major boost to airlines’ financials in Q4 of the current financial year.
“The peak October-December (Q3) quarter was not a cheerful one for the aviation industry as fuel prices remained high and players continued offering tickets at lower prices. The recent cut can help them to save on fuel expenses and offer fares at competitive prices,” an expert from the industry commented.
ATF is considered to make up the biggest chunk of airlines’ operating expenses at up to 34 per cent, and thus has a huge impact on their profits. Due to previous massive hikes in ATF prices, the top three private carriers all posted immense losses in Q2 of this financial year.
Ratings Agency ICRA Ratings had previously estimated that these three airlines combined had lost about Rs 20 crores each day in the financial year’s first half due a weaker rupee and fuel price increases.
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