IndianOil pitches for a larger bulk deal as AirAsia gears up for India foray
New Delhi   01-May-2013

Indian oil firms see jet fuel sales, which had fallen after Kingfisher Airlines was grounded, taking off again following the Jet-Etihad deal as well as the proposed launch of the AirAsia-Tata budget airline. IndianOil, the country's largest state-run refiner, is already in talks to expand business with AirAsia India.

"Currently, AirAsia is IndianOil's exclusive customer and it is keen to expand that tie-up in to a larger bulk deal after the launch of AirAsia India, especially as the new airline plans a sizeable footprint across India. Both the sides have been in negotiations for the past two months and could close the deal soon," said a senior industry executive, who did not wish to be identified.

IndianOil supplies around 30,000 kilolitre of ATF to the airline. "It is difficult to quantify now the kind of ATF volumes that the new airline will consume as its expansion plan still needs to be clearly outlined and approved, but by virtue of size, IOC will be looking at an exclusive bulk supply deal as it is the largest supplier of ATF in India," the source added.

AirAsia currently flies to Bangalore, Kolkata, Kochi, Chennai and Tiruchirappalli. Its proposed Indian venture plans a countrywide network with Chennai as the hub and an aircraft fleet that is expected to expand to 36 planes in five years.

IndianOil is the country's largest ATF supplier with 65% market share. Of the 5.5 million tonnes of ATF produced in the country it accounts for 3.5 mt. It has 97 aviation fuel stations and supplies to 80 major international airlines. Locally, it is the largest ATF supplier to both Jet Airways and Air India.

"Air Asia is an important international customer. However, as a matter of policy, we do not comment or share details of any business deals including commercial arrangements we enter with any of our customers," said N Srikumar, ED, IndianOil.

The aviation fuel business in India, which was earlier growing at around 6-7% a year, contracted more than 4% in 2012-13.

"Yes, there was a 4-5% de-growth last year primarily due to Kingfisher curtailing operations, the Air India strike and a slump in growth which made a lot airlines rationalise their routes," said R Radhakrishnan, general manager, ATF, Hindustan Petroleum. "Now with Jet Airways getting investment from Etihad and Air Asia and Tata launching a new airline, the market is definitely looking up and we will be watching the developments closely," he added.