Mumbai/New Delhi: Domestic airlines have not been able to report strong profits despite lower jet fuel prices but are better placed to take advantage of declining prices than their peers in Asia-Pacific because of the very low levels of fuel hedging and relative strength of the rupee.
A weaker currency and potential hedging loss — several airlines have hedged their fuel requirement at a higher price than the current $67 per barrel — would reduce the positive impact of lower fuel costs for airlines, analysts said.
In India, jet fuel prices dropped about 31 per cent between October and February before rising eight per cent in March to Rs 50,363 per kilolitre in Delhi. Fuel accounts for 30-40 per cent of a domestic airline's expenses and the proportion of fuel costs to total costs is declining because of the price benefit in recent months.
25/03/15 Aneesh Phadnis & Somesh Jha/Business Standard
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A weaker currency and potential hedging loss — several airlines have hedged their fuel requirement at a higher price than the current $67 per barrel — would reduce the positive impact of lower fuel costs for airlines, analysts said.
In India, jet fuel prices dropped about 31 per cent between October and February before rising eight per cent in March to Rs 50,363 per kilolitre in Delhi. Fuel accounts for 30-40 per cent of a domestic airline's expenses and the proportion of fuel costs to total costs is declining because of the price benefit in recent months.
25/03/15 Aneesh Phadnis & Somesh Jha/Business Standard
