Financial Daily from THE HINDU group of publications
Monday, May 13, 2002
Financial Daily from THE HINDU group of publications Monday, May 13, 2002 |
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Airlines Logistics - Airlines Corporate - Performance IA may hedge on ATF prices Ashwini Phadnis
NEW DELHI, May 12 INDIAN Airlines (IA) is examining several options including hedging against price risks on aviation turbine fuel (ATF) to get out of the red during the next financial year. "IA has been approached by at least one agency to hedge on ATF prices. An informal proposal has been received from the agency. The move is at an initial stage. The move, if approved by the Government, will prove a boon for the airline," a senior IA official told Business Line. IA, which reported a net loss of Rs 159.17 crore during 2000-01, has been badly hit by the hardening of ATF prices in the global market. There were two successive hikes in ATF prices during 2000 as a result of which the average price per kilolitre of aviation fuel rose by close to 48 per cent from Rs 15,180 to Rs 22,500. Officials said the dismantling of the administered price mechanism (APM) in the petroleum sector had not helped the airline as ATF prices had moved northwards since the dismantling. "The dismantling of the APM and the northward movement of ATF prices added between 15 and 20 per cent to the fuel bill of the airline," the officials said. The move by IA to examine the option of hedging on ATF prices comes at a time when Air India (AI) is still awaiting the report from Ernst and Young on ATF hedging. The Government had some time ago approved a proposal by AI to examine the option of going in for hedging on ATF prices. However, the report of E&Y would have to be approved by the AI board and the Government before the national carrier is allowed to hedge. Meanwhile, IA is hoping that the decision to lease four 50-seater ATR aircraft for its north-eastern operations as well as the Rs 35-crore annual subsidy offered by the Government for operations in that region will also help it report better financial results.
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