Airlines Seek ATF Relief, Warn of Possible Ops Shutdown

Major carriers including Air India, IndiGo and SpiceJet have flagged rising ATF costs and airspace curbs as key risks, urging government intervention to keep operations viable.

Mounting Cost Pressure

India’s leading carriers — Air India, IndiGo and SpiceJet — have sounded a sharp warning to the Centre, saying the industry is under “extreme stress” and could be pushed towards operational disruption if fuel costs continue to rise unchecked.

According to inputs shared with the civil aviation ministry and reported by PTI, airlines have sought an urgent revision in Aviation Turbine Fuel (ATF) pricing, alongside financial relief measures. The communication underscores that the current cost structure is becoming increasingly difficult to sustain.

Fuel Prices Surge

At the heart of the crisis is the sharp spike in global oil prices, triggered in part by geopolitical tensions in West Asia. Airlines say this has directly inflated ATF costs, which already account for nearly 40 per cent of an airline’s operating expenses.

Compounding the issue are higher “crack spreads” — the differential between crude oil and refined jet fuel — which have widened significantly in recent weeks. This has made jet fuel disproportionately expensive compared to underlying crude prices.

Industry representatives say the combined effect has led to steep increases in operating costs, particularly on international routes.

Airspace Curbs Add Strain

Airspace restrictions linked to regional conflicts have also forced airlines to reroute flights, adding to fuel burn and flight duration. Long-haul operations have been hit the hardest, with carriers reporting increased turnaround times and operational complexity.

Sources familiar with the matter said some routes are now operating with significantly thinner margins, while others are nearing break-even or slipping into losses.

Call for Tax Relief

Among the immediate demands, airlines have sought a temporary deferment of excise duty on ATF, currently at 11 per cent. They argue that easing the tax burden, even for a limited period, could provide breathing room as the sector navigates volatility.

There is also renewed focus on state-level taxes. High value-added tax (VAT) rates continue to weigh on fuel costs. For instance, Delhi levies around 25 per cent VAT on jet fuel, among the highest globally for a major aviation hub, while Tamil Nadu tops the chart at 29 per cent.

FIA Flags Pricing Imbalance

The Federation of Indian Airlines (FIA), representing major carriers, has separately written to the ministry seeking a return to a more predictable fuel pricing mechanism.

The body has recommended reintroducing a “crack band” framework — a system designed to cap extreme variations between crude oil and ATF prices. This model, implemented in October 2022, was seen as offering a balanced margin for oil marketing companies while keeping airline costs manageable.

FIA said the current ad hoc pricing approach has created a “severe imbalance” between domestic and international operations, making airline networks increasingly unviable.

Domestic vs International Gap

Airlines have pointed to the widening gap in fuel pricing between domestic and international operations. While the government capped ATF price hikes for domestic routes at ₹15 per litre last month, international operations saw increases of up to ₹73 per litre.

This disparity, industry executives say, has skewed route economics and intensified losses on overseas sectors. “The situation has practically made several international operations unviable,” a source indicated.

Sector on Edge

April has already seen significant financial strain across the aviation sector, with airlines reporting elevated input costs and pressure on yields. Passenger demand has remained relatively stable, but fare hikes have not fully offset the cost escalation.

Officials are understood to be reviewing the representations, though no formal announcement has been made yet. Any decision on ATF pricing or tax relief is likely to involve coordination between multiple ministries and state governments.

For now, airlines maintain that without timely intervention, the industry could face deeper financial stress — and in a worst-case scenario, operational disruptions. The ATF pricing issue, they say, has reached a point where immediate policy support is critical to maintain stability.