‘On verge of stopping operations’: In letter to Centre, airlines sound alarm over fuel prices

Middle East tensions have pushed up oil prices, while airspace restrictions have raised operating costs, especially on long-haul routes. ATF accounts for around 40 per cent of an airline’s operational expenses.“With an unprecedented rise in jet fuel prices and exorbitant crack/differential between crude and ATF, the operation of airlines is being challenged in totality,” the federation said.On Monday, TOI reported that Centre is weighing relief measures for airlines as the prolonged US-Iran war drives up costs and weakens travel demand, with a Rs 5,000 crore emergency credit guarantee scheme likely to be cleared this week to support stressed carriers. The aviation ministry also is seeking clearance for the Hotan route through China, which would help Air India bypass Pakistan airspace on westbound flights and save millions in extra fuel costs on longer diversions.The airlines body sought extension of the same fuel pricing mechanism across domestic and international operations, similar to the earlier crack band system.“… any ad hoc pricing (domestic vs international) and/or irrational increase in the price of ATF will result in unsurmountable losses for airlines and will lead to grounding of aircraft, resulting in cancellation of flights,” FIA said.“In order to survive, sustain and continue operation, we request your urgent intervention for immediate and meaningful financial support to tide over the current situation,” it added.The airlines have also sought temporary deferment of the 11 per cent excise duty on ATF.“With the abnormal increase in ATF prices from the pre-crisis period, adding rupee depreciation to the increased prices, the 11 per cent excise duty also increases manifold for the airlines and adds to the ATF price as a big impact on airlines,” the letter said.Last month, the government capped the increase in ATF prices for domestic operations at Rs 15 per litre, but prices for international operations rose by Rs 73 per litre.The federation said the pricing gap had made both domestic and international operations unviable and caused significant losses for the sector in April.“The airline industry in India is under extreme stress and is on the verge of closing down or of stopping its operations,” FIA said.It also called for a transparent pricing framework under the crack band mechanism of USD 12–22 per barrel introduced in October 2022, saying it had provided fair margins to oil marketing companies.According to FIA, Delhi has the second-highest VAT on jet fuel at 25 per cent, while Tamil Nadu levies the highest at 29 per cent.Other major aviation centres including Mumbai, Bengaluru, Hyderabad and Kolkata impose VAT between 16 per cent and 20 per cent, the federation said, adding that these six cities account for more than half of airline operations in India.