News Release Details
Airlines chart ways to fly around oil marketers
New Delhi 16-Jul-2007
Stung by rising oil prices, the airline industry, in a veiled threat to oil marketing companies, has mooted the idea of Airports Authority of India (AAI) buying out their distribution infrastructure in airports and providing equitable access to even private players. They have also suggested the idea of import of aviation turbine fuel (ATF) through a consortium of airlines and oil importing agencies, in effect bypassing the oil marketing companies. This was part of a presentation made by civil aviation ministry officials, led by Secretary Ashok Chawla , to representatives of public oil companies IOC, BPCL and HPCL earlier this week. The ministry and airline industry representatives have sought more clarity from the oil companies on the pricing of jet fuel. Oil marketing companies are likely to get back to the ministry, explaining their position, over the next couple of weeks. Sources said the proposal relating to AAI managing the distribution infrastructure of oil companies in airports is in line with recommendations by the Naresh Chandra Committee. RBI has already given an in-principle go-ahead to airlines to directly import ATP. Making a case for reduction in jet fuel rates (a key factor for airlines to break even), the ministry and industry representatives, in a joint presentation to oil marketing companies, pointed out that airlines can cut down their operational losses by 2 5 % with a Rs 1,000 per kilo liter reduction in ATF rates. Airlines closed the last financial year with over Rs 2,000 crore of losses and fuel accounts for 40% of their operating costs. ATP is priced on an average 65 % higher in India compared to International benchmarks. Citing lack of transparency in pricing, airlines said there were variations in the base price of jet fuel even in different centers within India. Domestic carriers. Point out that between April 2005 and October 2006, the crude price registered a net increase of 16.2%, while the oil companies passed on a net increase in jet fuel of over 31%. Airlines sought better understanding of the price build-up mechanism and high variations in marketing cost between stations. Airlines pointed out that ATF consumption has roughly doubled over the last five years, growing at rate of over 22% annually. With number of airplanes flying in Indian skies expected to double by 2010 from current size of around 300, the demand for ATF is only expected to grow in the coming years, a senior ministry official said.
New Delhi 16-Jul-2007
Stung by rising oil prices, the airline industry, in a veiled threat to oil marketing companies, has mooted the idea of Airports Authority of India (AAI) buying out their distribution infrastructure in airports and providing equitable access to even private players. They have also suggested the idea of import of aviation turbine fuel (ATF) through a consortium of airlines and oil importing agencies, in effect bypassing the oil marketing companies. This was part of a presentation made by civil aviation ministry officials, led by Secretary Ashok Chawla , to representatives of public oil companies IOC, BPCL and HPCL earlier this week. The ministry and airline industry representatives have sought more clarity from the oil companies on the pricing of jet fuel. Oil marketing companies are likely to get back to the ministry, explaining their position, over the next couple of weeks. Sources said the proposal relating to AAI managing the distribution infrastructure of oil companies in airports is in line with recommendations by the Naresh Chandra Committee. RBI has already given an in-principle go-ahead to airlines to directly import ATP. Making a case for reduction in jet fuel rates (a key factor for airlines to break even), the ministry and industry representatives, in a joint presentation to oil marketing companies, pointed out that airlines can cut down their operational losses by 2 5 % with a Rs 1,000 per kilo liter reduction in ATF rates. Airlines closed the last financial year with over Rs 2,000 crore of losses and fuel accounts for 40% of their operating costs. ATP is priced on an average 65 % higher in India compared to International benchmarks. Citing lack of transparency in pricing, airlines said there were variations in the base price of jet fuel even in different centers within India. Domestic carriers. Point out that between April 2005 and October 2006, the crude price registered a net increase of 16.2%, while the oil companies passed on a net increase in jet fuel of over 31%. Airlines sought better understanding of the price build-up mechanism and high variations in marketing cost between stations. Airlines pointed out that ATF consumption has roughly doubled over the last five years, growing at rate of over 22% annually. With number of airplanes flying in Indian skies expected to double by 2010 from current size of around 300, the demand for ATF is only expected to grow in the coming years, a senior ministry official said.