Aviation industry experts expect the ATF prices to fall by 16 per cent in November, compared with the current month. This, they say, translates into bridging of nearly half the gap between the airlines' operational costs and total revenues.
There could also be more good news. With Civil Aviation Minister Praful Patel pushing for decrease in taxes on ATF (taxes constitute 30 per cent of the cost) and meeting Finance Minister P Chidambaram for that purpose next week, any cut would have a positive impact on the break-even levels of carriers.
Chidambaram today said that while the government was looking at rationalisation of taxes on ATF, he had posed a question to the petroleum ministry on the issue of excise duty on jet fuel.
"At the moment, ATF constitutes 50 per cent of the operating cost of an airline. The average gap between revenue and our costs for the industry is around 15 per cent. So we will require an ATF fuel decrease of 30 per cent if we need to achieve the operational break-even," said Ajay Singh, director of low-cost carrier SpiceJet. In the last two months, ATF prices have dropped by 20 per cent.
According to industry statistics, the current average base price (excluding taxes) of ATF is Rs 44,526/kilolitre. The expected decrease of Rs 6,300/kilolitre will bring the base prices down to Rs 38,226/kilolitre.
An addition of 8.24 per cent excise duty and an average of 25 per cent sales tax gives the price of ATF as Rs 50,931/kilolitre, around 16 per cent lower than the current average ATF price of Rs 60,663/kilolitre.
The decrease, according to industry experts, would have been more had factors like the weaker rupee had not stemmed the fall of ATF prices.
The average price of the Indian crude basket this month was around 24 per cent lower than the average prices
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