A high jump in the Aviation Turbine Fuel (ATF) led to increase in the cost of domestic as well as international airline tickets. This also increased the cost of operations; thus decreasing the amount of the overall revenue earned by carriers. As per Center for Asia Pacific Aviation (CAPA) reports, the debt on these airlines also increased. However, the sharp reduction in the Aviation Turbine Fuel (ATF) in the past few months helped many airlines in regaining their momentum of operations and posting higher revenue in the financial books. After achieving a stable status, these carriers are now considering a reduction in airfare to pass on the benefit to fliers. Recently, the Singapore Airlines (SIA) announced its revised ticket prices.

Fuel Hedging

One of the important reasons that airlines are not able to reciprocate the impact of the reduction in ATF on final tickets is fuel hedging. Under this, carriers sign a contract with oil companies to supply fuel for the next few months or years on a pre-specified cost. This helps them in offering stable ticket prices for various destinations. As ATF constituents around half of the total ticket price, even a slight change in it can affect operations. It is been a few months since the announcement of the deductions in oil prices, and the previous hedging contract of most service providers is over now. They are in the process of signaling new ones, and these are based on the current market scenario. In addition to cheap international airline tickets, SIA also plans to expand its business in the emerging markets like India and China. It recently launched the joint venture named Vistara with Tata Sons.

Vistara Airline

This newly-launched carrier Vistara benefits from the experience of SIA and the expertise of Tata Sons in business strategies. It also shares codes with SilkAir and Singapore Airlines; thus allowing travelers to travel seamlessly across the globe. It recently announced the launch of flights from Hyderabad and Goa in March, 2015. It is expected that Vistara will start its international operations in the coming months if the aviation authorities of the country agree its rules regarding the same. As it is a part of SIA – the flag carrier of Singapore, options regarding city are Mumbai, Delhi, Chennai and from Hyderabad to Singapore flights may increase significantly. Currently, it operates around 68 flights every day, which will be increased up to 164 by the end of the first quarter of this year.

Currently, airlines have to operate for at least five years in the domestic market before offering international airline tickets. This clause restricts new airlines to fully use their resources. However, the aviation authorities of the country and carrier officials recently entered into discussions regarding the same. Some are of the opinion to keep it the same, while others are of the belief that this rule has lost its significance in the current scenario. Earlier, airlines started operation in their own country, and were quite new in this field; since the government ensured that they gain enough of experience before initiating international operations. However now, global operators set up their wing in lucrative markets, and often have more experience than the domestic ones. Here, these rules are quite irrelevant these days and the aviation authorities may either remove or amend them for the convenience of service providers. If this restriction is removed, the number of Mumbai, Delhi, and Hyderabad to Singapore flights may increase significantly in the coming months.


Source by Priyanka Manjari Mishra