Thursday, September 10, 2015

Aviation's moment

Last week, state-controlled oil marketing companies cut aviation fuel price by 11.7 per cent after crude oil witnessed further fall. With this, aviation fuel prices are down almost 40 per cent from last year's level. As fuel is their principal expenditure, this has benefitted Indian carriers greatly. For the quarter ended June 30, the fuel bill of the two carriers listed on the stock market was down sharply: SpiceJet by 53 per cent and Jet Airways by 20 per cent. Fuel accounted for 34 per cent of SpiceJet's total expenditure for the quarter, down from 43 per cent in the year-ago quarter, while in Jet Airways' case, it fell from 36 per cent to 27 per cent. Both carriers posted an operating profit for the quarter, as against a loss in the year-ago quarter. Even state-owned Air India, which has been mired in losses for several years, hopes to report a marginal quarterly profit towards the end of the current financial year.

This state of affairs is likely to continue for some more time. Crude oil prices are expected to remain low for a while, thanks to the Chinese economy slowing down, which will help keep aviation fuel prices under check. To help matters, domestic air traffic is growing fast. According to the International Air Transport Association, India's domestic passenger volumes grew 28.1 per cent in July, which makes it the fastest growing market in the world. Globally, the traffic grew just 7.8 per cent. As a result, most Indian carriers have seen an improvement in their plane load factor.
09/09/15 Business Standard Editorial Comment/Business Standard
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