Indian Airlines Urge Oil Companies to Delay Jet Fuel Price Increases

India's Airlines Seek Reprieve from Rising Fuel Costs

India's airlines have requested state-run oil refiners to postpone any hikes in jet fuel prices for domestic flights until the Middle East conflict subsides, in a bid to alleviate rising cost pressures and mounting losses. The proposal, floated by airlines including Air India Ltd., IndiGo, and SpiceJet Ltd., is currently being considered by the refiners, according to people familiar with the matter.

The discussions involve the oil and gas ministry, which may intervene as it did in April and May. A decision on the matter is expected before June 1. India's oil marketing companies, which set aviation turbine fuel prices, usually revise them on the first day of the month. The price setting has been deregulated for years, but in April, the government limited the most recent jet fuel price hike to 25% and required oil majors to keep them constant in May.

The state-owned refiners, including Indian Oil Corp., Hindustan Petroleum Corp., and Bharat Petroleum Corp., are discussing whether to raise jet fuel prices in June by up to 25% for domestic flights. They have been selling jet fuel for domestic flights at about 105,000 rupees ($1,090) per kiloliter, incurring a loss of 92,000 rupees per kiloliter.

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Oil constitutes around 40% of airlines' costs in India. The industry has warned of flight suspensions and other business disruptions if the government doesn't put a lid on fuel prices. Airlines are also lobbying for tax reductions or deferments and have reduced flight schedules due to a falloff in demand partly resulting from higher fares. A weaker rupee has made it costlier for airlines to pay in dollars for aircraft leases and overseas airport charges.

Since the Iran war, India has announced measures including rebates on plane landing and parking charges, regulating increases in jet fuel prices, and tax reductions on fuel for flights operating out of Delhi and Mumbai, its biggest airports. International flights have been impacted by the Middle East conflict, as airlines were using the Iran airspace to fly to Europe and America. The carriers have passed on higher costs to fliers in the form of increased fares, which has depressed demand in the world's third-largest domestic aviation market.

State-run refiners raised road transport fuel prices for a second time in less than a week, increasing prices of diesel and gasoline in New Delhi by 1% following a 3% hike last Friday. The increases are modest in comparison to the 50% surge in Brent crude since the war began.

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