Indian airlines likely to avoid ATF price stabilization fund amid ease in fuel prices: Sources
New Delhi, July 3
Indian airlines are likely to avoid seeking support under the government's recently approved ATF Price Stabilisation Fund as global jet fuel prices have eased this week from the sharp spike witnessed in March, according to sources.
The development comes weeks after the Union Cabinet, chaired by Prime Minister Narendra Modi on June 3rd approved a one-time budgetary support of up to Rs 10,000 crore for Oil Marketing Companies (OMCs) to provide Aviation Turbine Fuel (ATF) price stabilisation support to scheduled Indian airlines for both domestic and international operations.
The global average jet fuel price had surged to USD 195.19 per barrel in the March end, from USD 99.40 per barrel at the end of February due to tensions in West Asaia, registering an increase of nearly 100 per cent.
ATF, which is produced by refining crude oil, witnessed a simultaneous rise in both crude oil prices and refinery margins, also known as the crack spread.
The crack spread almost tripled within three weeks, increasing from USD 27.83 per barrel for the week ending February 27 to USD 81.44 per barrel for the week ending March 27.
The sharp increase had created one of the most challenging fuel cost environments for airlines globally in recent years.
As a result, airlines had revised fuel surcharges for international passengers in April. The surcharge was increased to USD 205 per passenger for Europe and USD 280 each for North America and Australia.
However, according to sources, the recent decline in fuel prices has led to a reduction in these surcharges.
The fuel surcharge has now come down to USD 125 per passenger for Europe, while passengers travelling to North America and Australia are being charged USD 200.
Sources said the moderation in global jet fuel prices is expected to reduce the immediate need for airlines to utilise the government's ATF price stabilisation support mechanism.
The Cabinet had approved the one-time support for OMCs to cushion Indian airlines from the impact of exceptionally high ATF prices following the sharp rise in global fuel costs. However, with fuel prices now easing, airlines are expected to manage operations without drawing on the stabilisation fund, sources added.
— ANI
Reader Comments
Actually, I'm a bit skeptical about this. The surcharges came down from $280 to $200 for US travel - still a lot! The airlines are quick to add surcharges when prices go up, but slow to reduce them. Let's see how much benefit actually passes to us common travellers. Government should keep an eye on this.
I work for a US-based company and travel between Bangalore and San Francisco frequently. The surcharge reduction from $280 to $200 is welcome but honestly, it's still high compared to pre-crisis levels. Also curious if this will eventually lead to better airfare for domestic routes where ATF costs hit harder due to shorter distances.
The crack spread tripling in three weeks - that's insane! Glad our OMCs and government have a stabilisation mechanism even if not used now. But why is India so dependent on global crude? We need to accelerate renewable energy and maybe even SAF (Sustainable Aviation Fuel) production. Long-term solution chahiye yaar! 😊
As someone who follows aviation economics, this is a positive sign for Indian carriers like IndiGo, SpiceJet etc. Their operating costs have been under severe pressure. The Rs 10,000 crore fund is a safety net, but if fuel remains stable, it gives airlines breathing room to focus on fleet expansion and service improvements. Good news for investors too!
One thing that troubles me is how quickly fuel prices rise but how slowly surcharges are reduced. And there's always this 'easing' narrative while the burden on common man remains high. Still, kudos to the government for proactive policy - better to have a
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