Oil prices have recently breached the US$65 per barrel mark for the first time in recent years. In fact, during the last months of UPA’s second tenure in April-May 2014 – the price had peaked at around US$108 per barrel before falling below $60 per barrel later. Since India largely relies on imported oil to fuel its economy any upsurge in global prices play havoc with mathematics of the economy.
One of the key impact of oil price rise is borne by the global aviation industry and especially domestic airlines. With slight variation across airlines, jet fuel costs account for nearly 40 per cent of overall expenses for airlines in India, which is a significant chunk.
In addition, jet fuel in India is priced nearly 60-70 per cent higher than global prices due to various state and central levies. The high price of jet fuel is ultimately passed on to the passengers which reduces affordability in air travel and dissuades the 120 million domestic passengers per annum market from reaching its true potential.
Furthermore, aircrafts used in non-stop long haul flights are heavier due to transport of additional fuel since there are no halts for refueling and restocking of supplies such as food and water.
To carry this larger quantum of jet fuel, food and water – the aircraft requires much higher fuel burn. This isn’t merely about carrying few hundred additional litres of fuel but multiple times that volume. Hence, with an endeavour to reduce the aircraft’s weight, airlines are compelled to compensate in terms of number of passenger seats which has a direct effect on revenues.
For example, a leading East Asian airline discontinued its non-stop long haul flight covering 10,300-mile to New York since the merely 100 passenger all-business class configuration was economically unviable.
One of the ways airlines can reduce fuel consumption is undertaking long haul flights with adequate number of stopovers. Such stopovers taken for refueling, replenishing water and food supplies allow airlines to reduce weight by carrying lower amounts of such provisions since restocking happens during halts. In turn, such arrangements enhance the number of passenger seats thereby augmenting profitability.
Additional stopovers during long haul fights can be achieved by halts at designated airports en route or merely by getting into codeshare pacts with other global airlines for exchange of passengers.
We increasingly find airlines globally and in India looking towards entering into codeshare pacts with other airlines to enhance connectivity and reduce operational costs thereby benefitting passengers.
Recently, Air France-KLM and Jet Airways signed a ‘Enhanced Cooperation Agreement’ for the development of their operations between Europe and India. This agreement will thus benefit passengers from multiple travel options and seamless service throughout the three partners’ networks spanning 44 cities in India and 106 destinations across Europe.
In addition to fuel efficiency due to stopovers, the agreement will offer an extended network and increased capacity between Paris, Amsterdam and India. The recent launches of Amsterdam-Mumbai by KLM and Bengaluru-Amsterdam and Chennai-Paris by Jet Airways are the first examples of this ambition. Improve connecting opportunities through adapted flight times via Paris-Charles de Gaulle, Amsterdam-Schiphol as well as Mumbai, Delhi, Bengaluru and Chennai.
Fuel efficiency is a critical factor in overall costs of operations for any airline. Over the long term, this reduced expenditure allows airlines to allocate more funds towards service enhancement. With Indian travelers increasingly becoming global and looking forward to better experience and seamless connectivity, such codeshare pacts which includes short duration stopovers can become a strong tool for both – lowering fuel cost and enhancing passenger satisfaction.
