One more snip – this time 12.5% - in the aviation turbine fuel (ATF) price has come the airlines' way but, as in the past, they have decided against cutting the fares.
And instead of criticising this move, most industry experts and analysts are applauding it.
Amber Dubey, partner and India head of aerospace and defence at global consultancy KPMG, said he hopes the airlines would use this opportunity to fly into profit instead of going "for a suicidal fight for market share".
"One hopes that airlines use the low ATF prices to make some profits in the January-March quarter (rather) than going in for a suicidal fight for market share. Deep discounts should be limited to just the non-peak hour flights with high unsold inventories," he said.
According to Dubey, while the reduction in ATF price was good it wasn't "great".
"It has reduced by about 26% from June (2014) prices. The crude oil price in the same period has crashed from $116 (per barrel) to $57 (per barrel), a fall of over 50%. In a low per-capita income country like India, there's no way aviation will reach the masses unless ATF prices are in line with global prices," he said.
Sanjiv Kapoor, chief operating officer (COO) of SpiceJet Ltd, reportedly said fares were already hovering at low levels and the jet fuel price reduction would provide relief given the high structural and operational costs in India.
Bangalore-based aviation analyst Pankaj Pandit said since most airlines were currently operating below breakeven load factor, the gains from lower jet fuel price will help them bring down their breakeven load factor to achievable level.
KPMG's Dubey fears discount offers may kick in once the average seat occupancy falls to the low of around 70% after January 5.
However, Pandit feels that reduction of Rs 500 or so in fares will not change demand situation dramactically.
"It will not bring in new flyers. And those who are flying currently will continue flying even at the current fares after the ATF price cut," he reasoned.
Pandit said GDP growth was the biggest driver for growth in the aviation sector. "The co-relation between GDP growth rate and aviation growth rate is 70% and the remaining 30% is determined by other factors like jet fuel prices, fares and others," he said.
The consecutive slashes in jet fuel prices without fare cuts will help airline wipe the losses on their balance sheet. SpiceJet's Kapoor estimates falling oil prices will help his airline save Rs 700 crore this fiscal.
According to rating agency CRISIL, local airlines are expected to log in an operating profit of Rs 8,100 crore by fiscal 2016.
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