Airlines see logic in ATF futures_726

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SpiceJet's annual spending on ATF for 2007-08 amounted to Rs 702 crore (Rs 7.02 billion). Industry estimates show that ATF spending for a low-cost carrier might go up to Rs 1,000 crore (Rs 10 billion) for 2008-09. The aviation industry is estimated to have spent around Rs 15,000-18,000 crore (Rs 150-180 billion) annually on ATF last year.
Earlier,You are not allowed to view links. Register or Login, airlines were only allowed to hedge fuel from overseas but they have been always wary of doing so due to the constant rise in crude oil prices, uncertainties regarding fuel pricing and complications in trading overseas.
"However,You are not allowed to view links. Register or Login, any airline would only hedge for 5-10 per cent of their total fuel requirement initially," said an industry expert.
Neither the trading value nor the contract period could be ascertained. IndiGo executives denied having traded any ATF today and SpiceJet executives said they were unaware of any such development.
MCX launched ATF trading in India. The maximum period of the contract is six months and the maximum order size is 10,You are not allowed to view links. Register or Login,000 barrels.
Low-cost carriers SpiceJet and IndiGo were two of the main traders of aviation turbine fuel (ATF) at the Multi Commodity Exchange of India (MCX), which started trading of ATF futures on Monday, market sources said. Around Rs 34.8 crore worth of ATF was traded till five on Monday evening.
While Air India could not give any recent update on their plans for ATF hedging,You are not allowed to view links. Register or Login, a company executive had sometime back said that there had been an internal approval for hedging almost 20 per cent of their jet fuel requirement.
Experts feel that the presence of a domestic benchmark on ATF prices, would give them a more reliable reference point to negotiate prices better. Sources in the industry said that apart from the two airlines, national carrier Air India and Jet Airways [Get Quote] are also interested in hedging fuel.
Trading of ATF in India would give companies an opportunity to hedge the fuel prices on a domestic platform and lock them for a particular period,You are not allowed to view links. Register or Login, thus hedging their risks against price rise on ATF for that period.
Airlines see logic in ATF futures
ATF currently accounts for more than 50 per cent of an airline's total costs. Rising fuel bill has pushed several airlines much deeper into the red. Industry losses this year are expected to touch Rs 8,000 crore (Rs 80 billion), double of the estimated losses of Rs 4,000 crore (Rs 40 billion) during the year 2007-08.