Direct import of ATF right step for airlines: Ajay Singh

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Direct import of ATF right step for airlines: Ajay Singh

Ajay Singh of SpiceJet says this could have a positive impact on aviation companies and will help airlines deal with jet fuel prices which make up about 40-50% of the total cost.

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Excerpts from Midcap Radar on CNBC-TV18 Watch the full show » ALSO READ See latest News about SpiceJet See previous management interviews See what other Experts & Brokerages are saying about SpiceJet SpiceJet BSE | NSE 01/01/70 Are Mutual Funds betting on SpiceJet?

The government's green signal allowing aviation turbine fuel (ATF) import saw private airline stocks soar. An Empowered Group of Ministers (EGoM) okayed direct import of ATF which contributes around 40% to the overall operating cost to an airline. Aviation minister Ajit Singh has confirmed that a cabinet note will be prepared but will take sometime.

Ajay Singh of SpiceJet says this could have a positive impact on aviation companies and will help airlines deal with jet fuel prices which make up about 40-50% of the total cost.

Below is an edited transcript of his interview to CNBC-TV18. Watch the accompanying video for more.

Q: How big an impact will the direct import of ATF have on your company?

A: ATF is a significant portion of the cost of our airline. For operations of low cost airlines, the cost is as much as 45-50%. Anything which brings that cost down will be significantly beneficial to airlines. As you know that the sales tax that airlines are paying today can be as much as 30% and when direct imports are allowed, sales tax will no longer need to be paid. So that's a significant savings for all airlines. This can be up to 10-15% savings on the operating cost which is really significant.

Q: It still has a bit of a loophole to cross which is cabinet approval. How much relief on the margin front could it give aviation companies like yours?

A: You need to ask the management of SpiceJet and the airlines but in terms of operating costs I would presume that there could be an 8-10% differential.

Q: There doesn't seem to be any decision quite yet with regards to 49% FDI in aviation. What is the sense that you get from the market environment right now? Are domestic airlines keen on it and are international buyers actually interested in getting into the market at this point?

A: It's an enabling provision and most airlines would welcome it because most airlines would probably need money as well as the connectivity that foreign investment from foreign airlines will bring. In terms of whether this would be desirable for foreign airlines, it's certainly desirable because of the markets which are growing.

It's Asia which is growing in terms of the aviation. Of the Asian markets, China is completely closed to foreign airlines investing in their airlines. So India would be an attractive place to invest. Several of the airlines themselves across the world are in trouble but if they look at their future markets and growth potential India is a great market and one would assume that there would be a significant interest.