Despite jet fuel price coming down, airlines won't cut fares

With major airlines suffering huge losses, air fares are unlikely to witness any decline despite a drop in jet fuel prices for the second time in a month. Officials of major carriers said that despite the reduction in the prices of aviation turbine fuel (ATF), the jet fuel rate remained almost 50 per cent higher as compared to the prices at the same time last year. ATF prices have risen from May 2010 till April 2011 by over 55 per cent, they pointed out.

As some of the airlines were facing a near bankruptcy situation with very high accumulated losses, the industry was not in a position to pass any benefit of ATF rate reduction to customers at this stage, they said. The officials, all requesting anonymity, said the airlines were already offering various promotional schemes and packages to attract fliers during the peak summer season. "None of us are in a position at this moment to lower fares any further," one official said categorically.

Oil companies have asked carriers like Air India and Kingfisher to pay their daily ATF consumption upfront. Fuel cost accounts for 40 per cent of the airlines' operating costs and the ATF rates vary from airport to airport — ranging from four to over 30 per cent — depending upon the state-level sales tax rates.