State-owned oil marketing companies have cut the prices of aviation turbine fuel, or jet fuel, by 12 per cent from midnight tonight - the first fortnightly price revision.
The cut of Rs 5,580 a kilolitre is in line with the fall in global crude oil prices, which are hovering at the 22-month low of about $55 a barrel.
This is the fifth cut in ATF prices since August, when rates rose to an all-time high of Rs 71,028.26 a kilolitre.
With this reduction, jet fuel prices are at Rs 38,163.23 a kilolitre, the same as in September last year.
The latest cut in prices has made jet fuel 45 per cent cheaper than it was in August this year. Crude oil prices in the period have dipped by 60 per cent.
The lower jet fuel prices are however not likely to result in lower air passenger fares as airlines claim they are still making losses and that fuel prices are still high. October was the fourth consecutive month when air passenger traffic fell.
Oil companies have agreed to revise jet fuel prices every fortnight from this month till the end of March in a bid to help airlines, whose finances are under pressure.
The impact of the cut will be evaluated before a decision is taken to pass on the benefits to air travellers - this was the common refrain of most airline executives contacted for their reaction on the reduction in ATF prices.
Welcoming the move as "good news", Air India Executive-Director Jitendra Bhargava said it should also be borne in mind that when the prices were shooting up month after month, the airlines were passing on "only part of the additional financial liabilities". "We will wait to look at the economic viability before any decision on reducing fares," he said.
Pointing out that the US dollar had appreciated significantly vis-à-vis the rupee, Bhargava said several major cost-heads of an airline were dollar-denominated. He pointed out that the passenger load factor had declined due to the global economic slowdown, leading to less air travel.
A Kingfisher Airlines spokesperson said, "We will evaluate the impact and then take a view" on lowering the fares or the fuel surcharge.
As the peak winter travel season had just begun, the carriers would use this opportunity to make good their losses before they decided to slash fares, industry sources said, adding that the fares would not come down before January.
When oil companies raised jet fuel prices by around 34 per cent between May and August this year, the airlines increased fares by over 65 per cent on most routes. Lower jet fuel prices since August this year have not resulted in full service carriers such as jet Airways and Kingfisher Airlines cutting fares so far.
The government has already allowed airlines to clear their outstanding of Rs 2,962 crore (Rs 29.62 billion) by March next year, extending the credit period to 90 days from 60.
