Airlines Under Stress, Centre Warns of Shutdown Risk?

India’s top air carriers Air India, SpiceJet and IndiGo informed the government that the airline industry is under extreme stress and on the verge of stopping operations, as they sought relief on Aviation Turbine Fuel (ATF) pricing and financial support.

The war between the US and Iran in West Asia has pushed the global oil prices and the airspace restrictions have driven up the operation costs, specially the long-haul flights. The ATF accounts for nearly 40 pc of the airline’s operations expenses, increasing the financial crisis.

The Federation of Indian Airlines (FIA), on April 26, has written a letter to the civil aviation ministry seeking measures to extend the same fuel pricing mechanism uniformly across both domestic and international operations, like it was done in the past.

In the letter, the three airlines which comprise the FIA, pointed out that the unprecedented rise in jet fuel prices and the widening crack or differential and exorbitant differential between crude and ATF, operating the airlines has become a challenge.

“… 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,” the federation said.

In order to survive, sustain and continue operation, the three airlines requested the aviation ministry’s urgent intervention for immediate and meaningful financial support to tide over the current situation.

The airlines also sought temporary postponement of excise duty on ATF, which is at 11 per cent. They said that the rupee depreciation has added to the increased prices and the 11 per cent excise duty further pushed their trouble manifold.

Last month, the government limited the hike in ATF price to Rs 15 per litre for domestic operations, but for international operations, the price rose by Rs 73 per litre.

The airlines lamented that the situation has practically made international operations, along with domestic operations, completely unviable and resulted in significant losses for the aviation sector in April.

They sought urgent intervention on the current ATF ad hoc pricing, the FIA said the current situation is creating a severe imbalance in domestic and international operations and rendering airline networks unviable and unsustainable.

The federation has pitched for a transparent pricing framework under the crack band mechanism (USD 12–22/BBL) that was implemented in October 2022.

The FIA also drew the attention of the ministry towards the VAT on jet fuel levied by different state governments, the highest being 29 per cent levied by Tamil Nadu, 25 per cent by Delhi,

16-20 pc by other cities like Mumbai, Bangalore, Hyderabad, and Kolkata.