As it looks to turnaround, Air India plans to hike the limit for hedging fuel costs to 25% amid oil prices hovering at low levels.
The national carrier's proposal also comes at a time when the government has decided to hike the excise duty on Aviation Turbine Fuel (ATF) to 14% from 8%.
ATF prices make up for a substantial portion of operating costs and steep fall in global oil prices in recent months has boosted the overall financial performance of airlines.
A senior official said Air India is looking to increase the hedging limit with respect to fuel costs as it can benefit from current fall in crude oil prices.
"We plan to hike the hedging limit to 25% from current level of 17%... This is to be utilised in the next two financial years," the official noted.
Currently, Air India is not fully utilising the legroom available for hedging with respect to fuel costs.
Hedging provides a cover from risks in steep price fluctuations.
Interestingly, the national carrier is anticipating a significant reduction in fuel costs in the current financial year ending this month.
According to the official, the fuel bill this fiscal is projected to be around Rs 5,700 crore, which would be sharply lower than Rs 8,200 crore seen in 2014-15.
The airline is expected to shave off its losses by around 40% to Rs 3,529.80 crore this fiscal even as its borrowings stood at over Rs 51,000 crore in the previous financial year.
06/03/16 PTI/dna
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The national carrier's proposal also comes at a time when the government has decided to hike the excise duty on Aviation Turbine Fuel (ATF) to 14% from 8%.
ATF prices make up for a substantial portion of operating costs and steep fall in global oil prices in recent months has boosted the overall financial performance of airlines.
A senior official said Air India is looking to increase the hedging limit with respect to fuel costs as it can benefit from current fall in crude oil prices.
"We plan to hike the hedging limit to 25% from current level of 17%... This is to be utilised in the next two financial years," the official noted.
Currently, Air India is not fully utilising the legroom available for hedging with respect to fuel costs.
Hedging provides a cover from risks in steep price fluctuations.
Interestingly, the national carrier is anticipating a significant reduction in fuel costs in the current financial year ending this month.
According to the official, the fuel bill this fiscal is projected to be around Rs 5,700 crore, which would be sharply lower than Rs 8,200 crore seen in 2014-15.
The airline is expected to shave off its losses by around 40% to Rs 3,529.80 crore this fiscal even as its borrowings stood at over Rs 51,000 crore in the previous financial year.
06/03/16 PTI/dna
