Airlines flag ‘extreme stress’ as jet fuel surge threatens route viability, fares

PTC Web Desk:  India’s aviation sector has urged the government to step in as a steep rise in aviation turbine fuel (ATF) prices begins to weigh heavily on operations and profitability.

In a communication to the Civil Aviation Ministry, the Federation of Indian Airlines (FIA), representing major carriers such as Air India, IndiGo and SpiceJet, said the industry is facing “extreme stress” due to escalating fuel costs.

ATF prices have climbed past Rs 2 lakh per kilolitre in recent weeks, mirroring the surge in global crude oil rates amid geopolitical tensions in West Asia. The spike has sharply increased the cost burden on airlines, where fuel already constitutes a significant portion of expenses.

According to the industry body, fuel costs, which typically account for 30–40% of total operating expenditure, have now risen to nearly 55–60%. This has led to a severe squeeze on margins, particularly at a time when airlines are still stabilising post-pandemic operations.

The FIA noted that several routes, especially international sectors, are becoming financially unviable as carriers struggle to absorb the rising costs. Pricing flexibility on such routes remains limited, adding to the pressure.

To ease the situation, airlines have sought immediate relief measures from the government. These include a temporary suspension of the 11% excise duty on ATF and a reduction in state-level value-added tax (VAT), which can be as high as 25% in certain regions.

The industry has also called for a more stable and predictable pricing mechanism for jet fuel. It pointed out that fluctuations in refining margins, or crack spreads, have kept ATF prices elevated even when global crude prices show signs of easing.

This disconnect between crude oil and jet fuel pricing has made cost planning increasingly difficult for airlines, the FIA said.

The current surge in fuel prices is largely linked to external factors, including ongoing tensions in West Asia and concerns over critical supply routes such as the Strait of Hormuz. Any disruption or uncertainty in these corridors tends to push global oil prices higher, directly impacting aviation fuel costs.

Airlines have cautioned that if the situation persists, they may be compelled to rationalise routes, reduce capacity or adjust fares to offset losses. While carriers have so far absorbed part of the cost increase, industry executives indicate that this may not be sustainable in the long run.

For passengers, this could translate into higher ticket prices and reduced flight frequencies on certain routes.

The FIA emphasised that the issue goes beyond short-term cost pressures and could affect the overall viability of airline operations if fuel prices remain elevated without corresponding tax relief.