India’s aviation sector is staring at a potential disruption, with major carriers cautioning that operations may become unsustainable without immediate government intervention on aviation turbine fuel pricing.
The Federation of Indian Airlines (FIA), which represents leading carriers such as Air India, IndiGo and SpiceJet, has approached the Civil Aviation Secretary seeking relief measures.
In its communication, the industry body cautioned that both domestic and international flight operations are increasingly becoming financially unviable due to a sharp surge in jet fuel prices.
It stated that airlines are under intense financial pressure and could be pushed towards shutting down or suspending services if support is not extended soon.
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Fuel price surge hits operations
The situation has been aggravated by disruptions in crude oil supply linked to the ongoing Iran conflict, now into its second month. This has led to a rise in petroleum product prices, including aviation turbine fuel, which remains the single largest cost component for airlines.
According to the FIA, the spike in fuel prices has significantly affected airline networks and their ability to sustain operations at current levels.
Proposed pricing mechanism
The association reiterated its support for a transparent ATF pricing structure. It highlighted a proposed ‘crack band’ mechanism, under which oil marketing companies would be able to fully recover increases in crude oil costs while maintaining margins through crack spreads.
The FIA noted that such a framework would help balance cost recovery for oil companies while keeping airline operations viable.
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Apprehensions rise as deadline approaches
Amid rising fuel costs triggered by the conflict in West Asia and the closure of the Strait of Hormuz, the Government of India had earlier capped the increase in domestic Aviation Turbine Fuel (ATF) prices at 25% to provide relief to airlines. However, carriers operating international flights continue to purchase fuel at nearly double the earlier rates.
The government had also indicated that the pricing decision would be reviewed after one month. With the end of April approaching, airlines now fear that the 25% cap may be withdrawn. In this backdrop, the country’s three largest carriers – Air India, IndiGo, and SpiceJet – have written to the government warning that any increase beyond the capped limit could force them to suspend operations.
‘Immediate support needed’
The letter stressed the severity of the current situation, pointing to the widening gap between crude oil prices and ATF rates as a major concern for the industry.
“In order to survive, sustain, and continue operations, urgent intervention with immediate and meaningful financial support is required to tide over the current situation,” the FIA said.
With costs rising and margins tightening, the coming weeks could prove critical for India’s aviation sector unless relief measures are introduced promptly.
