Major Indian airlines, under severe management pressure, have urged the government to take measures, saying they may suspend operations if they do not lower the price of aircraft as international oil prices have soared due to the Middle East war since late February.
According to Bloomberg News, the Federation of Indian Airlines (FIA) said in a recent letter to the Ministry of Civil Aviation, “The airline industry is under extreme (management) pressure,” adding, “It is (the situation) just before closing or suspending operations.”
He also urged the government to reimpose the cap on aviation oil prices introduced during the COVID-19 pandemic and to provide tax cuts or payment deferrals.
The FIA is an organization that represents the interests of major airlines such as Air India and Spyjet, as well as Indigo Airlines, India’s largest airline.
The FIA also expressed concern that “irrational increases in the price of aviation oil will result in insurmountable losses for airlines,” adding, “This will lead to flight suspensions and flight cancellations.”
Earlier this month, the Indian government drastically raised the price of domestic aviation oil but withdrew it within hours.
Bloomberg pointed out that the FIA’s request to cut the price of aviation oil clearly shows the aviation industry’s concerns due to the recent volatility of international oil prices.
Fuel costs account for about 40% of the airline’s operating costs, and any increase in aircraft oil prices can have a significant impact on profitability.
Indian airlines are also suffering from the recent weakening of the rupee against the dollar. This is because the cost of paying in dollars, such as aircraft rent and overseas airport fees, has increased significantly.
Vehicle fuel as well as aviation oil are under pressure to raise prices due to a lack of supply.
In southern India, oil distributors have recently virtually raised prices and limited supply by eliminating discounts offered to large buyers.
As a result, some gas stations in Andhra Pradesh and Telangana have run out of gasoline and diesel stocks.
According to Indian government statistics, diesel consumption surged 8% last month from the same month last year to an all-time high.
The Indian government has said it will not raise fuel prices immediately, but the transportation industry’s expectations are different from the government’s announcement.
Suresh, who runs a trucking company in Andhra Pradesh’s port city of Visakhapatnam, predicted, “The price of (fuel) will be raised in two to three stages to compensate for the losses incurred by Indian refiners (due to rising international oil prices).”
India is diversifying its crude oil suppliers to Venezuela and Iran, as well as Russia, as fuel supply and demand has grown due to the blockade of the Strait of Hormuz, an important energy transportation hub, in the aftermath of the Middle East war that began in late February.
In particular, it bought 5 million barrels of Iranian oil in seven years after U.S. sanctions on Iran in 2019.
JULIE KIM
US ASIA JOURNAL
