Jet fuel prices fall 9.5%, hit lowest level in over four years

Relief to domestic carriers, as fuel costs account for 40% of airlines' operational costs

In what might come as a big relief to domestic airlines, jet fuel prices saw the sharpest decline, by 9.5 per cent, since January this year.

In Delhi, the price of jet fuel has been cut from Rs 51,267 a kilolitre to Rs 46,407 a kilolitre effective August 1 — the lowest level in over four years. In December 2010, the price of the fuel in Delhi was Rs 45,240 a kilolitre. With the latest revision, the prices of jet fuel have fallen by over 30 per cent since August last year. This has come as a result of a decline in the international crude oil prices.

Fuel costs account for about 40 per cent of an airline’s operational expenses. Domestic airlines pay more for fuel than their regional peers, owing to state and central levies.

The profitability of airlines could improve with this decline . Lower fuel prices had contributed to SpiceJet’s profits in the first quarter of this year. It reported a net profit of Rs 71.8 crore in the first quarter of 2015-16 against a loss of Rs 124 crore in same period last year. The airline said it is the highest ever Q1 profitability in its history and its chairman Ajay Singh called it a “turnaround”.

While Jet Airways reported a consolidated net loss of Rs 1,802 in the fourth quarter of 2014-15 (down from a loss of Rs 2,465 crore in the corresponding period of the last financial year), the fuel expense on a stand-alone basis was lower 30 per cent at Rs 1,334 crore.

In its forecast, the International Air Transport Association (IATA) had said global airlines would post a collective profit of $25 billion on the back of falling crude oil prices and economic growth in 2015.