Can biofuels save India’s airlines from surging oil prices?

Will it bear fruit?
Will it bear fruit?
Image: Reuters/Shailesh Andrade
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India’s aviation sector has begun experimenting with biofuels.

On Aug. 27, the country’s first ever partially biojet fuel-powered aircraft took off from the northern city of Dehradun, Uttarakhand, and successfully landed in capital New Delhi, some 285 kilometres to the south.

The 72-seater Bombardier Q400 belonged to SpiceJet, to India’s fourth-largest airline by market share, and used a blend of 75% aviation turbine fuel (ATF)

“It (biojet fuel) has the potential to reduce our dependence on traditional aviation fuel by up to 50% on every flight,” Ajay Singh, chairman and managing director of SpiceJet, said in a press release.

Biojet fuels are made from sustainable raw materials (pdf) .

The one used by SpiceJet was developed by the Indian Institute of Petroleum, Dehradun, from the seed of the jatropha crop. It meets the specification of aircraft engine makers Pratt & Whitney and Bombardier, SpiceJet said, and can potentially reduce the airline’s carbon footprint by 15%.

The global aviation industry has been experimenting with biofuel for some time now.

In 2011, Alaska Airlines operated 75 selected flights on a cooking oil blend, while Dutch airline KLM flew weekly biofuel flights between New York and Amsterdam for six months in 2013. This January, Qantas Airways flew a biofuel flight between Australia and the US.

Biofuels generate the same amount of power as regular fuels and dissipate less heat. “It is way cheaper than regular fuel, too,” said Ashish Nainan, research analyst with CARE Ratings. “This can prove to be a natural hedge against ATF…If it can adapt to the scale of the aviation sector in India, it can actually bring down the overall fuel costs for companies.”

Hedge against oil

The Indian aviation market is set to be the world’s third biggest by 2025. Not surprisingly, global carriers are keen on a piece of the pie. This has also led to a price war, leaving the sector distressed.

And though demand has only grown faster than supply since Kingfisher Airlines went bust in 2012, airlines haven’t been able to cash in on this.

Most of them are under pressure from a depreciating rupee and surging fuel prices. Besides, domestic carriers are mostly pursuing volume over profitability. With airlines flying so many flights, fuel demand has surged.

So, in the April-June quarter, some of the biggest players bled massively due to macroeconomic headwinds.

While net profits of IndiGo, India’s largest airline by market share, nosedived 97% year-on-year to Rs28 crore ($4 million), Spicejet reported a loss of Rs38.06 crore. Jet Airways’ losses stood at Rs1,323 crore with its fuel expenses rising 35%.

Under these circumstances, any alternative to ATF is welcome for the price-sensitive industry.