Indian airlines are considering implementing capacity cuts following the next ATF revision due to a significant surge in jet fuel prices. Domestic carriers are currently evaluating the impact of escalating Aviation Turbine Fuel (ATF) prices and preparing for potential adjustments after the upcoming price revision in May. Industry sources suggest that airlines might reduce frequencies on less profitable routes, especially on short-haul sectors that could be most affected by substantial fuel cost increases.
Airlines are also exploring various scenarios, including the possibility of modifications to the government-mandated cap on ATF price hikes. If the current 25% monthly price increase limit is removed, there could be a notable increase in domestic flight cancellations. Despite recent government initiatives to support the aviation sector, such as reducing parking and landing charges by 25% at major airports and capping April’s ATF price hike at 25%, airlines are exercising caution and closely monitoring fuel price fluctuations before making any network or capacity adjustments.
India’s heavy dependence on oil imports, which satisfy more than 85% of its fuel requirements, has heightened susceptibility to geopolitical disruptions like the recent West Asia crisis, causing supply concerns in certain regions of the country. Additionally, the government has raised excise duties on petroleum products, including high-speed diesel, with immediate effect, as per a notification issued by the Ministry of Finance. The government has also raised the duty on ATF to Rs 42 per liter from Rs 29.5 per liter previously, while maintaining the export duty on petrol at nil. Furthermore, oil marketing companies have increased ATF prices.
