ATF price surge: Government weighs revival of fuel stabilisation fund for airlines

Amid rising jet fuel prices, the government is considering whether to revive the price stabilisation fund and is also in discussions with airlines as well as oil marketing companies on the high ATF costs.

Aviation Turbine Fuel (ATF) accounts for around 40 per cent of an airline's operational expenses, and with the continuing West Asia turmoil, fuel prices have been on the rise.

"One of the most important things is how the West Asia crisis is putting a big burden on ATF prices. We are in discussions with airlines and OMCs (Oil Marketing Companies)," Naidu said on the sidelines of a conference in the national capital on Tuesday.

The government is considering whether to have the price stabilisation fund for the ATF, according to a senior official. Specific details could not be immediately ascertained.

Earlier Rs 10,000 crore support

In June, the Union Cabinet cleared a one-time budgetary support not exceeding Rs 10,000 crore for Oil Marketing Companies (OMCs) to provide ATF price stabilisation in order to provide support for domestic airlines.

However, airlines were not keen on availing the fund, which has lapsed now.

IndiGo raises fuel surcharge

On Monday, the country's largest airline IndiGo announced a hike in fuel surcharge for domestic and international flights in the wake of rising jet fuel prices.

IndiGo had said ATF prices have remained volatile in recent months, especially following the geopolitical situation in the Middle East.

According to the airline, the continuous rise in fuel prices, with the latest month-on-month increase exceeding 14 per cent, has taken ATF costs to levels that are amongst the highest in the last decade.

Airlines seek change in pricing formula

Last month, the Federation of Indian Airlines (FIA) sought a review of the existing jet fuel pricing formula, saying that domestic ATF should be priced on the actual cost of fuel plus a reasonable margin rather than international benchmark pricing.

FIA represents Air India, IndiGo and SpiceJet.

The unprecedented increase in fuel costs, compounded by geopolitical disruptions and rupee depreciation, is placing significant pressure on airline cash flows and viability, it had said in a letter to the civil aviation ministry.