Airlines see logic in ATF futures

Delhi/Mumbai: Low-cost carriers SpiceJet and IndiGo were two of the main traders of aviation turbine fuel (ATF) at the Multi Commodity Exchange of India (MCX), which started trading of ATF futures today, market sources said. Around Rs 34.8 crore worth of ATF was traded till five in the evening today. Neither the trading value nor the contract period could be ascertained. IndiGo executives denied having traded any ATF today and SpiceJet executives said they were unaware of any such development. SpiceJet's annual spending on ATF for 2007-08 amounted to Rs 702 crore. Industry estimates show that ATF spending for a low-cost carrier might go up to Rs 1,000 crore for 2008-09. The aviation industry is estimated to have spent around Rs 15,000-18,000 crore annually on ATF last year. MCX launched ATF trading in India today. The maximum period of the contract is six months and the maximum order size is 10,000 barrels.
Trading of ATF in India would give companies an opportunity to hedge the fuel prices on a domestic platform and lock them for a particular period, thus hedging their risks against price rise on ATF for that period. Earlier, airlines were only allowed to hedge fuel from overseas but they have been always wary of doing so due to the constant rise in crude oil prices, uncertainties regarding fuel pricing and complications in trading overseas.
08/07/08 Business Standard

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Categories: Indian Aviation- In General Jul 2008