Lower crude oil prices are expected to bring down jet fuel rates by 10 per cent in September, but passengers are unlikely to get the benefit as airlines are reluctant to reduce their fares.

If prices fall, it would be the first such instance in five months during when aviation turbine fuel price became dearer by over 20 per cent, moving in tandem with international crude prices that went up from $105.77 per barrel in April to $132.47 per barrel in July.

On July 11, global crude oil prices had touched a record high of $147 per barrel. Global jet fuel prices track oil prices and move with a lag of three to four days.

"Average oil prices and ATF prices are down this month compared with last month. If the month ends this way, jet fuel prices may go down by around 10 per cent," said a senior official with the state-owned Indian Oil Corporation [Get Quote], the largest seller of ATF in the country.

Jet fuel accounts for around 45 per cent of the total operating cost of a domestic airline, and a 10 per cent drop in fuel price would result in a saving of around 4.5 per cent. This is likely to provide relief to airlines as they are projected to post a combined loss of over Rs 8,000 crore (Rs 80 billion) in the current financial year (2008-09).

On their part, airlines said they will not cut passenger fares even if jet fuel prices come down. Officials in low-cost carrier SpiceJet said just one month of lower prices will not help them improve their finances. The airlines have increased passenger fares every month since May as the oil marketing companies raised jet fuel prices.

"A 5-10 per cent decrease in fuel prices will not lead to decrease in fares," said Wolfgang Prock-Schauer, CEO, Jet Airways [Get Quote].

In the past, whenever jet fuel prices went up, airlines passed the burden on to the passengers by increasing the fuel surcharge and basic fares. This led to drop in passenger traffic.

The companies, however, may see better times in the coming months as analysts project oil prices to fall further to around $100 per barrel, which will also bring down aviation fuel prices. This could help the airlines control their expenditure, and even lower fares to attract passengers, analysts said.

The price of the basket of crude oil that Indian refineries buy has averaged $113.35 per barrel so far this month, 14.43 per cent lower than the $132.37 per barrel in July.

Prices of jet fuel, like prices of other unsubsidised oil products, are revised on the first day of every month based on the average price of the product in the Singapore exchange. Prices of jet fuel, however, had been cut marginally on June 5 after the government reduced duties on the fuel.