SpiceJet chooses RIL for direct fuel import, stock soars

Shares of SpiceJet today jumped more than 11 percent in the morning trade after the no-frills airline filed an application with the Director General of Foreign Trade (DGFT) seeking permission to directly import aviation turbine fuel (ATF).

According to a report in Business Standard, the airline has picked Reliance Industries for its plans to import jet fuel as part of efforts to cut what is its biggest expense. " Reliance Industries Ltd and Essar Oil are the two private oil marketers in the country, but Essar does not have any ATF tanking facility in any port or at airport," the report said.

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When permitted, the direct imports will considerably bring down the airline’s operational cost.

Shares of the company opened at Rs 24.70, then rallied 11.15 percent to an early high of Rs 26.90 on the BSE. The scrip was trading at Rs 26.20, up 8.26 percent on the BSE at 1143 hours.

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SpiceJet is the first airline to make such a move, after the government in end-February issued the notification allowing private airlines to import jet fuel or ATF directly.

Airlines have been demanding permission to get fuel supplies from overseas so that they do not have to pay sales tax that are as high as 30 percent in some states.

Jet fuel, which makes up for about 40 percent of an airline’s operating expenses, costs the most in the region.

The airline industry is facing financial crisis. The high operating cost of the sector is largely attributable to the cost of ATF.

SpiceJet operates 270 flights daily to 32 Indian cities and two international destinations.

Agencies