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Business News›Industry›Transportation›Airlines / Aviation›Federation of Indian Airlines seeks review of existing ATF pricing formula

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Federation of Indian Airlines seeks review of existing ATF pricing formula
Synopsis

The Federation of Indian Airlines highlighted the significant impact of rising jet fuel costs on airline operations. They emphasized that current pricing formulas are insufficient due to ongoing geopolitical issues and currency fluctuations. The FIA requested a shift to a 'Cost Plus' pricing model for Aviation Turbine Fuel. They also noted the need for government support to maintain affordable air travel for passengers.

ANI

Mumbai: The Federation of Indian Airlines (FIA) is seeking a review of the existing jet fuel pricing formula, and said domestic ATF should be priced on the actual cost of fuel plus a reasonable margin rather than international benchmark pricing.



The unprecedented increase in fuel costs, compounded by geopolitical disruptions and rupee depreciation, is placing significant pressure on airline cash flows and viability, it said.



In a letter to the Civil Aviation Ministry late last month, FIA also said that "if timely relief is not available, the airlines may be compelled to withdraw from several unsustainable routes."

Air India, IndiGo and SpiceJet are the members of FIA.



From around 30-40 per cent, airlines' operating costs have increased to around 55-60 per cent under the prevailing circumstances, out of which ATF remains the single largest variable cost, it said.




The current conflict (West Asia) has pushed the Brent Crude from USD 72 / BBL to USD 118 / BBL, and the resultant ATF price (MOPAG + Premium) has moved from USD 87.24 and touched a high of USD 260.24 / BBL (295 per cent increase) and is currently trading at USD 175.33/BBL, significantly higher as compared to March 2025 pricing.

MOPAG, or Mean of Platts Arab Gulf, is the international pricing benchmark used to determine the base cost of Aviation Turbine Fuel (ATF) in India.

FIA has requested the government to review the pricing formula being followed for ATF pricing and mitigate the impact of an abnormal crack of USD 60/BBL as against the average of USD 10-12/BBL.



The same can be achieved by moving into a "Cost Plus" pricing model as against International Benchmark pricing, it added.



The airline's ability to recover these costs remains limited, as tickets are often sold well in advance and fare increases cannot be implemented immediately or recovered retrospectively, it added.



It also said that airlines may face further pressure on profitability, cash flows, and operational planning as the conflict is continuing with limited visibility to its end, resulting in further curtailment of operations/network detrimental to the entire sector.



The ongoing uncertainty also makes fuel procurement, budgeting, and network planning more challenging in the short term to long term, FIA said.



The measures taken by the government, including the ones relating to ATF price cap of 25 per cent over March 2026 pricing from April 1- June 8, reduction of VAT on ATF in Delhi and Maharashtra to 7 per cent (for six months), and a 25 pc reduction in landing and parking charges for domestic flights for the April-July period this year, need to be continued.



Such measures would provide much-needed support to the aviation sector, help preserve affordable air travel for passengers, and enable airlines to continue contributing to India's economic growth and connectivity objectives despite the challenging operating environment, FIA said in the letter.

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