2.

14 Change Is In the Air

Higher consumption of aviation turbine fuel in recent months reveals an incipient sectoral
recovery.
There is some hope on the horizon for the Indian aviation industry. Higher consumption of
aviation turbine fuel (ATF) in recent months indicates improved aircraft movement on rising
passenger and freight traffic. Indeed, ATF consumption got a boost despite price hikes due to
the rupee depreciation. In the first half of the current fiscal, ATF consumption grew 4.4 per
cent compared with a decline of 4.8 per cent in the same period last fiscal. In September
alone, the latest month for which data is available, ATF consumption has expanded by a
robust 7.3 per cent. While there is a base effect to the current growth, it is encouraging that
consumption is not falling further. The consumption of 442,000 tonnes in September 2013 is
almost comparable to the 445,000 tonnes in September 2011. 2011/12 had registered an all
time high ATF consumption of 5.53 million tonnes. In fact, consumption of 2.67 million
tonnes in the first half of this fiscal is on par with the 2.68 million tonnes in the same period
in 2011/12.

Petroleum Products Planning and Analysis Cell, the data wing of the Petroleum

Ministry, attributed the rising ATF consumption to higher domestic air travel owing to lower
fares charged by airlines. High ATF uplift does indicate increasing aircraft movements. We
now have to see how the peak season of November to January period pans out, says Amber
Dubey, Partner and Head, Aerospace and Defence, at global consultancy KPMG.
In the last decade, ATF consumption witnessed two declines in a fiscal year. The first came in
2008/09, a result of an overall decline in industrial and economic activity because of global
factors. It fell for the second time in 2012/13, owing to the closure of Kingfisher Airlines,
high ATF prices and fares. Data released by the Airports Authority of India also reveals an
uptick in recent aircraft movement. It improved by 3.4 per cent in August, the latest month
for which data is available, and by two per cent in July. Domestic and international passenger
movements in August rose by 19.2 and 14.3 per cent, respectively. The next financial year is
also expected to witness healthy growth on expected reforms in ATF taxes, reduction in
airport charges and flights by new entrants such as AirAsia and Tata-Singapore Airlines,
says Dubey. Meanwhile, ATF price, which had peaked to a record `77,089 per kilolitre (Delhi
prices) in October on weakening rupee, has been revised to `73,607 from November. The
decline in price has come after four consecutive hikes and will help airlines in improving
business prospects.[9]