Airlines brace for a hard landing as ATF prices surge

New Delhi: High aviation turbine fuel (ATF) prices, a pilot shortage and a weakening rupee may make tickets costlier this summer. Airlines have planned for muted growth despite strong demand-total domestic flights are expected to rise just 3% over last year, as carriers trim networks to cope with surging costs driven by the Iran war and a sliding local currency.

Fewer Capacity

Market leader IndiGo is cutting back and has sought approval for around 13,900 weekly flights this summer, 2% fewer than last year, to run a more reliable schedule after an operational breakdown in December, when it was caught short of pilots after the aviation regulator implemented new rest rules. They sharply raised requirements, but training more pilots quickly is not easy. The regulations mandate fixed hours in training before pilots are cleared for the cockpit.


Tata-owned Air India has sought approval for around 4,500 weekly flights, up just over 4% from the previous year. Its low-cost arm Air India Express has planned around 3,300 weekly flights, almost unchanged from last year. Airline officials warned of further cuts if jet fuel prices climb higher. The summer schedule, which began on Sunday, runs through the last Sunday of October.

"Airlines often file for more flights than they actually operate, to give themselves a buffer to tweak their network based on demand. If the fuel price situation and the Middle East war don't improve, there will be more cuts," said an airline official.

Carriers are nervously watching April 1, when domestic oil marketing companies will revise jet fuel prices, a hike widely expected to be sharp. Following the war, fuel crack spreads-the difference between a barrel of crude and the jet fuel refined from it-shot up to nearly $100 before cooling. Fuel makes up around 30% of operating costs on average, according to industry grouping IATA.

Last week, airlines told civil aviation minister Ram Mohan Naidu they would be forced to ground aircraft if fuel prices spike. Despite imposing fuel surcharges, they said they cannot recover the full incremental cost.

"If the current situation continues, airlines will face severe financial losses, pushing several operators closer to unsustainable financial conditions and potentially threatening their continued viability," the Federation of Indian Airlines, comprising IndiGo, Air India and SpiceJet, said in a letter to the Centre.