Airfare hike fears: What steps has government taken to ease fuel price shock for domestic airlines?
To mitigate the impact of soaring ATF prices on airlines, the government has enacted a 25% cut in airport charges for three months, supporting domestic carriers and striving to keep airfares stable amid the challenges posed by global events.
The ongoing West Asia war has pushed global crude and aviation turbine fuel (ATF) prices higher, raising concerns about a spike in domestic airfares for passengers.
To cushion airlines from the sudden shock and prevent a sharp rise in ticket prices, the government has rolled out a series of measures, ranging from capping fuel price pass-through on domestic routes to cutting airport charges.
Here are some steps taken by the government to shield domestic carriers from the price fluctuations in the global oil market and disruptions in the broader aviation industry due to geopolitical tensions:
25% cut in airport costs
The government on Wednesday, 9 April, announced a 25% cut in landing and parking charges for domestic carriers, aiming to support them and avoid a sudden spike in ticket fares.
The Ministry of Civil Aviation has directed the Airports Economic Regulatory Authority to implement the price reduction at major airports in the country. The cut has come into effect immediately and will remain in place for three months.
Similarly, the Airports Authority of India (AAI) has also been directed to implement the prescribed reduction at all its non-major airports. The benefit will apply to all domestic flights over the same period.
The latest move is expected to reduce landing and parking charges payable by airlines at major airports during the applicable period by around ₹400 crore, the government said in a statement.
Limited ATF price pass-through on domestic routes
In a similar move, the government announced earlier that domestic airlines will not have to bear the full brunt of the steep increase in jet fuel prices, as a mechanism is in place to shield them.
On 1 April, the price of ATF, or jet fuel, was more than doubled to a record ₹2.07 lakh per kilolitre.
The Ministry of Petroleum and Natural Gas said that Oil Marketing Companies (OMCs) have passed on only a partial, staggered increase of 25% ( ₹15/litre) in ATF prices on domestic routes.
Full ATF price pass-through only for international routes
While domestic routes were shielded by the government, it also noted that foreign routes will bear the full increase, in line with the prices airlines pay in other parts of the world.
All these measures are taken to enable carriers to manage operational costs while ensuring that the benefits of affordable air travel continue to reach passengers. Hence, no impact on domestic air fares is expected so far.
ATF is a completely deregulated product; hence, it is priced at prevailing benchmark international prices. This is in accordance with a written understanding with the airlines.
The rising jet fuel prices have taken a major hit on airlines, which are already burning more fuel to take longer routes to Western destinations because of airspace closures due to the war. Fuel accounts for around 40% of an airline's operating costs.
Govt to take more measures if needed
At the same time, the aviation ministry is keeping a close watch on the evolving situation and said that further measures will be taken to ensure the viability of air operations and safe, affordable air travel for passengers.
Speaking about the announcement, Minister of Civil Aviation, Shri Ram Mohan Naidu, said, “Airfare increases are being further contained by reducing landing and parking charges levied by airport operators. This step is part of the Ministry’s overall effort to keep the aviation sector stable during this volatile period and to ensure ease of flying for passengers.”
“Even in the prevailing challenging situation, when global air operations are impacted, we have ensured that cancellations and rising fuel costs do not severely affect the operations of our domestic carriers,” he added.