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Indian airline executives have formed a committee to meet with public sector oil marketing companies (OMCs) to discuss the issue of the rising air turbine fuel (ATF) costs.
Requesting anonymity, a top government official said requesting anonymity, earlier last week, when the airline CEOs met the civil aviation minister, they discussed of the idea to possibly find a mid-way to hedge to ATF prices.
“The airlines informed the Minister of Civil Aviation that they had decided to meet the OMCs. It was discussed that they were working towards coming up with a formula on how the fuel prices should be dealt with to make it predictable along with having a cushioning,” the person said. “For example, of it goes up there should be a cushion for the airlines and if it goes down, there should be a cushion for the oil companies. So somewhere in the middle is what they should be looking at.”
Sources said that a committee of airlines and OMCs was formed including SpiceJet, GoFirst and Indigo leading it along with representation from Vistara and other airlines and public sector OMCs i.e. Indian Oil Corporation Ltd, Hindustan Petroleum Corporation Ltd and Bharat Petroleum Corporation Ltd.
Plea to Civil Aviation Minister
However, a top airline executive said there were “Around four meetings so far, but there doesn’t seem to be a middle ground. The OMCs do not seem to understand our plight, and there is not much scope for a resolution there. The airlines are likely to request the Civil Aviation Minister to mediate a meeting with the Petroleum Minister.”
On June 16, the price of (ATF) was increased by ₹19,757.13 per kilolitre, or 16.26 per cent, to ₹1,41,232.87 per kl (₹141.2 per litre) in the national capital. This hike came after a marginal dip of 1.3 per cent (₹1,563.97 per kl) cut in rate 15 days prior to that.
In a recent interview with BuisnessLine, Jyotiraditya Scindia, Civil Aviation Minister, had said: “Now with the rising ATF costs, almost 40 per cent of the cost of operating and aircraft is the fuel cost. It has a huge bearing on airlines’ cost structure, especially for an industry that is going through huge losses, it also impacts 40 per cent of the revenue.”
He further explained, “Now, combining the rising fuel cost with that with the price elasticity which is very high leading to increase in fares, this would also impact demand. So it’s been a double edged sword but it’s an area where the sector is maneuvering itself very carefully.”
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