Airlines seek government intervention to fight jet fuel price hike

The Indian aviation industry, already reeling from the financial repercussions of Covid-19, faces more strain with Wednesday’s massive hike in jet fuel prices.

From looking to operate international routes to seeking government support, national carriers are trying to find ways to deal with the pressure of high aviation turbine fuel (ATF) prices, after the steepest ever increase of 18 per cent.

Low-cost carrier IndiGo says the government needs to intervene and rationalise taxes if it wants flying to remain affordable for the common man.

Also Read | ATF prices hiked again: What it means for you

“Over the past few weeks, crude oil prices have soared to a seven-year high nearing $140 per barrel, due to the ongoing (Russia-Ukraine) conflict. This has resulted in over 50 per cent hike in ATF price from January 2022 till date, including the 18 per cent hike in jet fuel prices on Wednesday. The situation adversely impacts us, given that ATF constitutes over 45 per cent of our operational costs,” IndiGo told DH in a statement.

We believe that such measures are needed now, more than ever, to offset this increase in cost and make flying viable for airlines and affordable for consumers, the airlines said.

The Tata group-owned Vistara says that it is looking forward to the commencement of international travel to offset high jet fuel prices. “The resumption of scheduled international flights from March 27 is expected to stimulate demand and we hope it will help the industry in managing the increase in ATF prices”, the full-service carrier told DH.

Rohit Tomar, Managing Partner, Caladrius Aero Consulting, says Vistara can benefit due to the sanctions against Russia. “The restrictions on long-haul air traffic due to the Russian airspace sanction will help someone like Vistara as they could look at a possible yield premium on the Europe and USA markets. However, the airlines focused on the Middle East and Southeast Asia region would be caught in between high fuel price pressure and fare discounting,” says Tomar.

He says carriers like Vistara want to resume international flights so that they could push up prices on long-haul flights to the US. “They can take advantage of the supply-demand gap which has occurred due to the US not wanting to fly on Russian airspace”, he explains.

There will be pressure on Indian carriers on Middle East routes because once they open up and old bilaterals come into force, middle-eastern carriers will up their capacity, which will put pressure on them and the Indian airlines cannot increase their prices, Tomar adds.

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