Brent crude oil prices have dropped 16.1% from their highs in April to $104.13 per barrel (Rs 5,165 today). But the hope that this will bring relief to aviation firms and boost their stock prices is likely to be pie in the sky.

Investors closely track crude prices, as fuel constitutes up to half the operating costs for airlines. But a fall in benchmark fuel prices doesn’t mean anything for these companies this time around.

For one, the price of the Indian crude basket has fallen only 10% since April compared with the steeper fall in Brent. Secondly, the sharp fall in the rupee versus the dollar has meant that import costs haven’t really declined by much. The local currency has fallen 10.6% since August, which has pretty much wiped off any advantage from lower crude prices.

Vijayanand Gupta/Hindustan Times

“Jet fuel prices have averaged $127 per barrel (quarter-to-date) against an average price of $131 in…(the April-June quarter)," points out Jasdeep Walia of Kotak Institutional Equities in a 21 September note.

“Taking into account the depreciation (about 5%) in the rupee, the price is broadly rupee terms."

As global risk aversion increases, pundits are busy racing to revise their projections for the rupee downwards.

Now, if airlines are expecting any help from the revenue side, it’s a bit optimistic as well.

Sure, from January to August, domestic travel has increased by 18.6%, which is pretty impressive considering growth in other sectors. But with the slowdown gathering pace, will this be sustainable?

Also, airline operators haven’t been able to increase prices or pass on increase in costs as they have increased capacity at a faster rate than demand.

“Price discounting by Air India, and lower passenger load factor (year-on-year) on account of capacity additions" are the major reasons for lower fares, Walia points out.

In short, airline stocks will remain grounded for quite some more time to come.