Airlines lobby for fuel cost relief ahead of price revision

New Delhi: Two days before revision of jet fuel (ATF) prices, the airline industry has sent an "SoS" to the Centre, seeking its "urgent intervention" on fuel pricing.

While commercial carriers had won a reprieve last month on ATF (aviation turbine fuel) prices, with the hike in base price for domestic flights capped at 25% and the same for international flights was more than doubled, the Federation of Indian Airlines (FIA), which represents Air India, IndiGo and SpiceJet, has proposed tax reduction to check price surge, amid high global oil prices.



It has suggested rational ATF pricing, temporary suspension of 11% excise on ATF for domestic operations and reduction of VAT rates in key states. "India's largest aviation hub - Delhi - has second highest VAT at 25%. Tamil Nadu is highest at 29%. Rates at other major aviation hubs of Mumbai, Bangalore, Hyderabad, Kolkata range between 16% and 20%. These six cities cover over 50% of airline operations within India. To ensure uninterrupted operations of airlines within India, FIA requests urgent intervention to review the ATF cost challenges," the lobby group said, while arguing that fuel prices were making airline networks unviable and unsustainable.

ATF accounted for 30-40% of airlines' cost earlier and the band increased to 55-60% after hike in April, "creating completely inoperable conditions". A weaker rupee had added to cost woes.

"Airlines are in a very difficult, precarious and challenging situation. Airlines have been somehow managing operations till date, despite rising cost and additional operation expenses due to airspace closure... 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 FIA letter added.

"There is a (price) control mechanism for other fuels like diesel and petrol, which is missing for ATF and the price of ATF is significantly high as compared to its production cost. ATF is just 4% of (India's) refinery production. Of the 4% ATF produced in India, only 30% is consumed by its domestic airlines and 20% by international carriers and surplus 50% is being exported," it adds.

High ATF prices "will result in unsurmountable losses for airlines and lead to grounding of aircraft resulting in cancellation of flights."


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