Air India, IndiGo, SpiceJet seek ATF price relief:Warn of possible ‘Ops shutdown’ amid rising fuel prices, airspace restrictions

Country’s biggest airlines like Air India, IndiGo and SpiceJet have told the government that the airline industry is under extreme stress and on the verge of “stopping operations”. These airlines have sought a revision in Aviation Turbine Fuel (ATF) pricing and financial support, PTI reported on Tuesday.
What is the reason? The West Asia war has raised the oil prices, and airspace restrictions have increased airlines’ operating costs, especially on long-haul routes. Additionally, Aviation Turbine Fuel (ATF), which accounts for around 40% of an airline’s operational expenses, has also become costlier. Also, the airlines have sought temporary deferment of excise duty on ATF, which is at 11 per cent.
FIA urges pre-war fuel pricing mechanism Meanwhile, the Federation of Indian Airlines (FIA) has also written to the civil aviation ministry, seeking steps to extend the same fuel pricing mechanism uniformly across both domestic and international operations, as was done in the past. With an unprecedented rise in jet fuel prices and exorbitant crack/differential between crude and ATF, the federation said the operation of airlines is being challenged in totality. This pricing was imposed based on establishement with the establishment of the crack band. A crack band refers to a proposed pricing mechanism for ATF designed to prevent extreme differences between the price of crude oil and the final, refined jet fuel cost. The airlines said the situation has practically made international operations, along with domestic operations, completely unviable and resulted in significant losses for the aviation sector in April.
Seeking urgent intervention on the current ATF ad hoc pricing, FIA said the current situation is creating a severe imbalance in domestic and international operations and rendering airline networks unviable and unsustainable. What are the previous pricing stratagies Last month, the government limited the hike in ATF price to Rs 15 per litre for domestic operations, but for international operations, the price rose by Rs 73 per litre.
The federation has pitched for a transparent pricing framework under the crack band mechanism (USD 1222/BBL) that was implemented in October 2022, saying there was a fair and reasonable margin for Oil Marketing Companies (OMCs).
According to FIA, the country’s largest aviation hub, Delhi, has the second-highest value-added tax (VAT) of 25 per cent on jet fuel, while the highest rate is 29 per cent levied in Tamil Nadu.