India airlines warn of flight suspensions as war drives up fuel cost
Fuel accounts for as much as 40% of an airline’s operating expenses
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[DELHI] India’s major airlines warned of a potential suspension in services unless the government lowered jet fuel prices.
“The airline industry in India is under extreme stress and are on the verge of closing down or of stopping its operations,” the Federation of Indian Airlines (FIA), representing carriers including IndiGo, Air India and SpiceJet, said in a letter to India’s Civil Aviation Ministry, seen by Bloomberg.
They sought a return to pandemic-era cost caps on aviation turbine fuel and a reduction or deferment in taxes. The federation and the ministry did not immediately respond to queries sent after usual business hours.
Speculation is mounting that Prime Minister Narendra Modi’s administration will raise fuel prices once voting in state elections ends on Apr 29. While the government at a briefing on Tuesday (Apr 28) denied any plan to raise petrol prices, it declined to answer a similar question on ATF.
India, in early April, had rolled back a huge hike in jet-fuel prices for local flights within hours of pushing them to a record.
Any “irrational increase in the price of ATF will result in unsurmountable losses for airline and will lead to grounding of aircraft resulting in cancellation of flights”, according to the FIA letter dated Apr 26.
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The appeal underscores the sector’s sensitivity to fuel price volatility, which can quickly erode already thin margins. Fuel accounts for as much as 40 per cent of an airline’s operating expenses, meaning even modest increases can significantly affect profitability and ticket pricing.
Besides high fuel prices, airlines are also grappling with a weakening rupee, which inflates US dollar-denominated expenses such as aircraft leases and overseas airport charges.
In response, the government has rolled out temporary relief measures, including a 25 per cent cap in monthly increase of jet fuel prices and a similar reduction in landing and parking fees at Indian airports for three months, and is considering loans backed by sovereign guarantees. BLOOMBERG
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