Indian airlines are likely to avoid seeking support under the government's recently approved Aviation Turbine Fuel (ATF) Price Stabilisation Fund, as global jet fuel prices have eased this week from the sharp spike witnessed in March, according to sources.
Cabinet approval and fund details
The development comes weeks after the Union Cabinet, chaired by Prime Minister Narendra Modi on June 3, approved a one-time budgetary support of up to Rs 10,000 crore for Oil Marketing Companies (OMCs) to provide 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 at the end of March, from USD 99.40 per barrel at the end of February due to tensions in West Asia, registering an increase of nearly 100 per cent.
Impact of crude oil and refinery margins
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.
Fuel surcharge adjustments
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.
Reduced need for stabilisation fund
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.
