Already hit by Pakistan ban, Indian airlines warn of near-shutdown as Iran war pushes oil up

The Federation of Indian Airlines, representing Air India, IndiGo and SpiceJet, has warned the government that the aviation industry is on the verge of “stopping operations” due to rising fuel costs linked to tensions in the Middle East and disruptions near the Strait of Hormuz.

The airlines sought a temporary deferment of the 11 percent excise duty on Aviation Turbine Fuel (ATF), as well as a uniform fuel pricing mechanism for domestic and international operations, Indian media reported on Tuesday.

ATF accounts for about 40 percent of airlines’ operating costs. Last month, the government capped the ATF price increase at 15 Indian rupees ($0.16) per liter for domestic flights, while international prices rose by 73 Indian rupees ($0.77) per liter.

“… any ad hoc pricing (domestic vs international) and/or irrational increase in the price of ATF will result in unsurmountable losses for airlines and will lead to grounding of aircraft, resulting in cancellation of flights,” the federation said in a letter dated April 26 to the Civil Aviation Ministry.

“In order to survive, sustain and continue operation, we request your urgent intervention for immediate and meaningful financial support to tide over the current situation,” it said.

Last month, New Delhi curbed the ATF price hike to Rs 15 per litre for domestic operations, and for international flights, the price rose by Rs 73 a litre.

The airlines said the situation has practically made both international and domestic operations completely unviable and resulted in significant losses for the aviation sector in April.

Indian airlines are already in stress due to closure of Pakistani airspace. Around 800 weekly flights — departures and arrivals — operated by Indian airlines have been affected due to the closure of Pakistani airspace since April last year following military tensions between the two neighbours.

Air India, owned by Tata Group and Singapore Airlines has reportedly forecast a hit of $600 million a year due to the Pakistan airspace ban.