Indian Carriers Warn Industry Shutdown as Fuel Prices Soar, Seek Urgent Relief from Government

The airline sector in India is under extreme stress and on the verge of closing down, an airline body representing the three top carriers warned the government as it sought relief on the pricing of aviation turbine fuel (ATF).

The Federation of Indian Airlines (FIA), which represents the three largest airlines in the country — Air India, IndiGo and SpiceJet — dashed off an urgent SOS to the government, seeking its urgent intervention.

The high prices of ATF "will result in unsurmountable losses for airlines and lead to grounding of aircraft resulting in cancellation of flights," it said.

The FIA pointed out several routes had become financially unviable, which would result in airlines being forced to reassess operations. "The airline industry in India is under extreme stress and is on the verge of closing down or of stopping its operations," it 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," the top airline body told the government.

The ongoing elections to state assemblies in Kerala, Tamil Nadu, West Bengal, Assam and Puducherry had seen the government limit the hike in the base price of ATF for domestic flights to 25 per cent. But for international flights, it had been jacked by more than 100 per cent, virtually crippling the industry.

ATF prices for international operations of Indian carriers shot up to Rs200,000 per kilolitre (about Dh7,800). While in the past they accounted for 30 to 40 per cent of their costs, it has now shot up to 60 per cent or even more.

The FIA warned that several routes had become financially unviable and the airlines would be forced to reassess operations on many international sectors if ATF prices continued to soar.

The current ad hoc pricing of ATF was "creating a severe imbalance in domestic and international operations and rendering airline networks unviable and unsustainable," said the federation. It also referred to the price control mechanism for other fuels including diesel and petrol, which were however, absent in the case of ATF.

The FIA pointed out that ATF accounted for just four per cent of India's refinery production; the domestic sector consumed 30 per cent of it, while the international operations of Indian carriers accounted for just 20 per cent of the consumption. The rest of the ATF is exported from the country, it added.

FIA also called on the government to temporarily remove the 11 per cent excise duty on ATF and reduce state-level VAT, which is as high as 25 per cent in some states.

Indian airlines also face challenges as they pay high fuel taxes, but competing foreign airlines do not impose hefty taxes on fuel bought abroad. When crude oil prices fall, the ones for ATF in India continues to remain high, crippling the Indian international carriers.