How to manage the fuel bill?
In the airline business, Air Turbine Fuel (ATF) costs constitute an average 25%-30% of overall Operation Costs. That makes it the single largest operating cost component that impacts the bottom line. The contribution of fuel cost varies largely subject to fluctuations in crude oil prices & US$-linked exchange rate. The chart below that covers data from FY2018 (source: Annual reports of respective airline) highlights that when average crude oil prices were sub US$60/bbl, fuel costs as a % of Ops Cost were largely on the lower side of the range.
A similar chart for FY12, 13 & 14 would have shown much higher contribution to Airline Ops Costs when the oil prices were in triple digits. Refer to below chart (source: IATA)
The crude oil prices (ATF is among the most refined variants of crude oil), as well as US$ linked rate of exchanges are beyond an airline’s control. This fact compels airlines to focus on other key elements within their control that can affect fuel costs, while an airline embarks on network expansion.
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