Domestic airlines are expected to save USD 400 million in the current fiscal on account of sharp decline in fuel prices, which could also mark a turnaround for the loss-making aviation sector, a report said today.

"Between September last year and January this year, into- wing air turbine fuel (ATF) prices in India declined by 24 per cent. India’s airlines could save USD 400 million this year on lower fuel prices," Sydney based aviation think tank Centre for Asia Pacific Aviation (CAPA) said.

With fuel accounting for around half of the operating costs of an airline in the country, the 24 per cent fall represents a 12 per cent reduction in costs, the report said.

The sharp decline in fuel prices is a major source of relief in a market where ATF is about 50 per cent higher than the countries like Dubai or Singapore due to higher government taxes, it said.

CAPA also expects a further fall in the prices by the month end, as the oil marketing firms have yet to pass on the full extent of the decline in global fuel prices.

Noting that the country’s beleaguered aviation industry is starting to see signs that could possibly mark the beginning of a structural turnaround in its fortunes, the report said that the decline in oil prices is perhaps the greatest single reason for the improved sentiment in the industry.

The reduction in the cost of fuel due to a combination of declining base prices, higher discounts and lower tax is very welcome, it said, adding "there is still an overriding need to address structural challenges in the aviation sector." 

"The government should take this opportunity to push through with bold decisions such as classifying ATF as a declared good that would result in a uniform sales tax of four per cent across the country," the report said.

Combined with the fall in base prices this could reduce airlines operating costs by a game-changing 30 per cent that would stimulate growth and set the industry on a more viable long-term trajectory, the CAPA report observed.