Are airline companies working on containing their costs?
They do. Airlines continue to concentrate on acquisition of fuel-efficient aircraft, and efficient routing. And they even install blended winglets to reduce the cost of fuel. Yet, rising oil prices have offset any such initiatives. With relentless oil price fluctuations, the only answer for Indian airlines is to take a leaf out of the book of their global counterparts and incorporate a sustained hedging program to maintain fuel cost as a percentage of total expenditure. We have the laws in place, to facilitate hedging? With the Reserve Bank of India (RBI) relaxing regulations (through its landmark circular Risk Management and Inter-Bank Dealings – Commodity Hedging dated May 31, 2007) and permitting Indian airlines to hedge their ATF exposures overseas even for domestic off-takes, the ability to use hedging as a tool to control spiralling ATF costs is further enhanced. Earlier, hedging was permissible for international off-takes only. Domestic off-takes required specific approval, whic
