Air India, IndiGo, SpiceJet may cut operations as ATF price surges

In the wake of the unprecedented rise in Aviation Turbine Fuel (ATF) prices, the Federation of Indian Airlines (FIA) urged the government to reinstate the fuel pricing mechanism uniformly across both domestic and international operations, as was done in the past.

The rise in ATF prices and airspace restrictions due to the West Asia crisis have led airlines to incur higher operating costs. In this scenario, a revision in ATF prices and financial aid is imperative, else the companies would be compelled to halt operations, the federation said.

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

“… 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, which represents Air India, IndiGo and SpiceJet, said.

“In order to survive, sustain and continue operations, we request your urgent intervention for immediate and meaningful financial support to tide over the current situation,” it said in a letter on April 26.

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 significantly to ATF costs,” they said.
“The airline industry in India is under extreme stress and is on the verge of closing down or stopping its operations.”

“The other major aviation cities, viz. Mumbai, Bangalore, Hyderabad and Kolkata, range between 16 per cent and 20 per cent. These six cities cover more than 50 per cent of airlines’ operations within India,” the federation said.