Business Daily from THE HINDU group of publications
Wednesday, Jun 04, 2008
ePaper | Mobile/PDA Version | Audio
Business Daily from THE HINDU group of publications Wednesday, Jun 04, 2008 ePaper | Mobile/PDA Version | Audio |
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Airlines Markets - Stocks
BL Research Bureau
The over 18 per cent hike in aviation turbine fuel effected by oil companies for June 2008 may step up the pressure on the profitability of listed airline companies. It may also delay break-even for low-cost carriers such as SpiceJet and Deccan Aviation. The latest hike takes the total year-on-year increase in ATF prices to over 85 per cent (from Rs 39,000/ kilolitre levels to Rs 73,000 per kl). ATF accounts for an estimated 40-50 per cent of the total operating costs for domestic airlines. Though airlines have, so far, been able to hike the ‘fuel surcharge’ component in their fares to offset hikes in ATF prices and have done so this time too, the impact of this on ticket sales and load factors needs to be watched. The leeway on pricing available to domestic carriers already appears to be on the wane amidst slowdown in domestic passenger traffic, higher proportion of discounted seats and reduced load factors reported in the March quarter. The growth in domestic air passengers carried moderated to 11 per cent in the first quarter of 2008, from 25 per cent in the same period last year. Trends in tourist arrivals, a slowing economy which may moderate business travel and increasing differentials between train and air fares, may also curb airlines’ ability to pass on the incidence of fuel price hikes to customers. With crude oil prices (as well as jet fuel) hovering close to record highs, domestic airlines may also like to bide their time before they begin to actively hedge their fuel exposures through forward contracts. Flights costlier on ATF hike Centre plans 4% uniform levy on ATF Costlier fuel, new hires dent Jet Airways As crude rises, airlines unlikely to cut fuel surcharge Hedging, the only logical option for airlines to control ATF cost More Stories on : Airlines | Stocks | Petroleum
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