Indian airlines warn Centre of flight cancellations over fuel crisis amid West Asia conflict

THe Federation of amerindic Airlines (FIA), representing broadcast bharat, indigo plant and SpiceJet, has warned the regime of flight cancellations and said the airline industry is on the verge of “stopping operations” due to the surge in aviation turbine fuel (ATF) prices, in a letter dated April 26 seeking urgent government intervention ahead of the next ATF revision on May 1. The FIA said the current ad hoc pricing structure—with domestic and international ATF rates treated differently—was creating a “severe imbalance” in operations and rendering airline networks “unviable and unsustainable.”“Any ad hoc pricing (domestic vs international) and/or irrational increase in the price of ATF will result in insurmountable losses for the airline and will lead to grounding of aircraft resulting in cancellation of flights,” the letter said.On April 1, state-run oil marketing companies initially raised ATF prices for domestic airlines by 114.55%, from ₹96,638 per kilolitre to ₹2,07,341 per KL in Delhi, and for foreign carriers by 107%, from $816.91 per KL to $1,690.81 per KL. Later the same day, the government intervened to moderate the domestic increase to 8.6%, bringing the rate for scheduled carriers such as IndiGo, SpiceJet and Air India down to ₹1,04,927 per KL. International operations, however, bore the full increase.ALSO READ | Indian airlines hit hardest as Dubai limits foreign flights till May 31 amid West Asia war: ReportThe airlines said the April pricing had already made international operations unviable and resulted in significant losses.The West Asia conflict has pushed Brent crude from $72 per barrel to $118 per barrel, the FIA said, with ATF prices—measured as the index MOPAG plus premium—moving from $87.24 per barrel to a high of $260.24 per barrel, a 295% increase, before easing to $235.63 per barrel. The crack differential between Brent and MOPAG, previously in the range of $11-18 per barrel, has widened to $132.59 per barrel.Since ATF accounts for 30-40% of airline costs, the FIA said, the price surge had pushed fuel’s share of operating costs to 55-60%, making operations unviable. Rupee depreciation had compounded the burden, as had rising costs from local suppliers of polymers, petrochemicals and ancillary products linked to petroleum prices. Airlines were also grappling with longer flight paths and higher fuel burn due to airspace restrictions from the West Asia conflict.ALSO READ | 'Time may come when...': Rajnath Singh on India's role amid West Asia crisis“Airlines have been somehow managing operations till date despite rising costs and additional expenses due to airspace closures and intermittent geopolitical disturbances. Now, with an unprecedented rise in ATF prices and exorbitant crack differential between crude and ATF, the operation of airlines is being challenged in totality,” the FIA said.The association made three specific requests. First, it sought a return to the crack band mechanism—a transparent pricing framework with a band of $12-22 per barrel—that was implemented in October 2022 following the Covid-19 period, when the government had supported airlines through a similar adjustment. Second, it requested a temporary deferment of excise duty on ATF, currently levied at 11% on domestic operations. Third, it sought a reduction in value-added tax on ATF in key states—Delhi has the second-highest VAT on jet fuel at 25%, with Tamil Nadu the highest at 29%.Mark D. Martin, chief executive of Martin Consultancy, an aviation advisory firm, dismissed the letter as a pressure tactic. “Airlines need to find a better alibi in their attempt to pressure the government. India is the only country in the world cushioning jet fuel costs to protect airlines from potential price rises..”