The year 2019 has begun on a positive note for domestic carriers as state oil marketing companies have reduced the price of ATF by 14.7 per cent. This is the second consecutive drop in the price of ATF and the sharpest cut since November 2008. A kilolitre of ATF will now cost 58,060 in Delhi compared to 68,050 earlier on. The revision brings relief to domestic carriers that have been struggling to remain profitable because of a rise in operating costs. Fuel accounts for around 40 per cent of the expenses of domestic airlines. High fuel prices and depreciating Rupee resulted in heavy losses for the three major airlines in the second quarter of FY19. In fact, in the first half of FY19, the listed airlines together lost around 20 crore per day collectively registering a loss of 3,640 crore. Crude oil prices, however, are on a decline over the last few weeks over concerns of a supply glut. Boeing expects crude price to remain around $60 per barrel in 2019.
Inability to pass on high costs has been another bane for domestic carriers. While domestic air traffic grew 19 per cent between January and November 2018 on a year-onyear basis, much of it has come on the back of low fares. Airlines have been discounting fares throughout the year to fill up seats or raise cash. Industry experts say fares are holding up now, but could come under pressure due to capacity induction and seasonal weakness in February-March 2019.
