In a welcomed development for the aviation sector, jet fuel prices in Delhi have experienced a notable decrease effective January 1. The rates for Aviation Turbine Fuel (ATF) in the national capital were revised from Rs 1.06 lakh per kilolitre kl to Rs 1.01 lakh per kl. The adjustment was implemented by state-owned industry leaders, Indian Oil Corporation, Bharat Petroleum, and Hindustan Petroleum, who collectively control pricing. The recalibration was based on the average international price in the preceding month.
Throughout the latter half of the previous year, the aviation sector grappled with soaring ATF prices, impacting operational expenses significantly. The relief, eagerly awaited by airlines, finally arrived in November 2023 as global crude prices began to stabilize. ATF, constituting a substantial portion of an airline's operational costs, often prompts fare adjustments to counterbalance increased expenses.
The routine revision of ATF prices aligns with industry norms and is influenced by factors such as the average rate of the international benchmark and foreign exchange rates. These monthly adjustments play a pivotal role in shaping airlines' operational expenditures, either alleviating financial burdens or exacerbating challenges, contingent on the direction of the change.
The news of the fuel price reduction has resonated positively in the stock market, with key players in the aviation sector witnessing an upswing in share values. At 12:15 pm, Interglobe Aviation experienced a nearly 1% increase in shares, while SpiceJet saw a gain of 1.8%. IndiGo, the nation's largest airline, observed its shares quoted at Rs 3,019.60 per share on the NSE, and SpiceJet at Rs 61.20 per share on the BSE.
For IndiGo, which allocates a significant portion of its budget to fuel expenses (37.15% of total expenditure), the impact of fuel prices is considerable. In the first quarter of the fiscal year 2024, the airline spent Rs 5,228 crore on fuel. Despite this, IndiGo reported a profit of Rs 188.9 crore for the quarter ending September, showcasing a remarkable turnaround from the net loss of Rs 1,583.33 crore in the corresponding period the previous year. The revenue from operations for IndiGo surged by 19.5%, reaching Rs 14,943 crore.
In contrast, SpiceJet reported a narrowed net loss of Rs 449 crore in the September quarter, compared to Rs 830 crore in the corresponding period of the previous year. Despite a 27% year-on-year decline in consolidated revenue from operations, settling at Rs 1,429 crore, SpiceJet is actively seeking growth opportunities. This is evident in its bid to acquire Go First, currently undergoing insolvency proceedings.
The positive market response and the resilient financial performance of key players indicate the sector's adaptability to the dynamic landscape, finding ways to thrive amidst ongoing challenges. Passengers can also anticipate potential relief in airfares, making air travel a more affordable and attractive option in the coming months.
