Mumbai: Airlines would benefit from the decline in crude oil prices, but an impending recession in the US could affect international travel, especially in the business segment, according to airline officials and analysts.
International crude oil prices fell sharply on Friday against the backdrop of the looming economic crisis and downgrade of US credit rating. Both Brent and wholesale price index benchmarks saw oil prices dip, as stock markets tumbled across the world. Analysts expect falling oil prices to provide much needed relief to airlines.
“Over the medium term, crude prices may remain low, as macro economic indicators in the US and other economies are not encouraging. From the perspective of Indian carriers, a fall in oil prices is positive. Load factors and outbound travel continue to remain healthy. The fall in oil prices would lead to improvement in their margins,'' said an aviation analyst.
Fuel costs account for 40 per cent of airline expenses and rising prices have been the main reason for losses in aviation sector. Jet Airways, the country's largest domestic carrier by market share, which posted a Rs 128-crore loss on a consolidated basis in the first quarter of 2011-12, said its fuel bill shot up by Rs 655 crore over the corresponding period of the previous year. Spicejet and Kingfisher, two other listed carriers, have not announced their results . These are, however, expected to post losses for the first quarter.
06/08/11 Aneesh Phadnis/Business Standard
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