Shares of Indian aviation sector companies, including IndiGo and SpiceJet, among others, were trading sharply lower on Tuesday, April 28, amid concerns over rising crude oil prices.
In a letter dated April 26 to the Ministry of Civil Aviation, the Federation of Indian Airlines (FIA), which represents Air India, IndiGo and SpiceJet, said that urgent support is required for ATF pricing to continue airline operations, CNBC-TV18 reported.
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The FIA criticised the current pricing mechanism, stating that ATF adhoc pricing is creating a severe imbalance in domestic and international operations and rendering airline networks unviable and unsustainable. It added that this imbalance is distorting route economics and compelling airlines to reassess the viability of their networks, the report said.
The sharp rise in crude oil prices has led Indian oil marketing companies (OMCs) to hike aviation turbine fuel (ATF) prices, which typically account for more than 50 per cent of an airline’s operating costs. This has not only increased overall operating expenses but also made it difficult for airlines to balance ticket pricing.
The impact is more severe on international routes. According to reports, FIA highlighted that ATF prices for overseas operations have risen by around ₹73-75 per litre, making certain routes unviable and resulting in substantial losses. This, in turn, has further squeezed margins for Indian carriers, especially as they compete with foreign airlines operating from lower-cost hubs.
Additionally, the FIA has urged the government to temporarily suspend the 11 per cent excise duty on ATF for domestic operations, reinstate a crack band pricing mechanism, and reduce VAT in key aviation hubs.
