Air India on Wednesday welcomed the centre $10,000 crore fund to help keep aviation fuel prices stable. The airline said the decision will provide much-needed support to the aviation sector and help airlines maintain connectivity during a period of high fuel price volatility.
This came after the Union Cabinet, headed by Prime Minister Narendra Modi, approved a one-time support package to help keep ATF (aviation turbine fuel) prices stable for Indian scheduled airlines. This comes after a sharp increase in global aviation fuel prices linked to the ongoing war in West Asia.
Read also | The third runway at Delhi airport may remain closed until September amid efforts to enhance aircraft handling capacity
Air India supports the government’s move
The airline said on the X website that it “warmly welcomes and greatly appreciates” the government’s decision.
“This progressive measure provides much-needed support to India’s aviation system and reinforces the government’s commitment to enhancing connectivity for the people of India, while enabling airlines to serve passengers more effectively,” the statement said.
What did the government say?
Earlier, Civil Aviation Minister Ram Mohan Naidu said that tensions in West Asia (due to… The US war on Iran led to a sharp rise in global aviation fuel prices. To ensure that this increase does not translate into a sudden burden on passengers, the Council of Ministers approved $10,000 crore fund to support Indian airlines.
According to the minister, this measure will help keep air ticket prices more predictable, maintain connectivity across the country and ensure airlines continue to operate smoothly amid global uncertainty.
Read also | Indian Airlines reduces its domestic flights by about 22% amid rising fuel prices
How the scheme will work
Under this scheme, the government will provide up to $Rs 10,000 crore interest-free support to oil companies to help keep ATF prices stable when global fuel prices rise. When fuel prices fall, the amount advanced will be recovered from the oil companies and returned to the government.
Coverage for domestic and international flights
The program will be open to all Indian airlines operating domestic and international flights. The government said it will help airlines manage fuel costs by offering more stable ATF prices and protecting them from price spikes.
Airlines joining the scheme will only purchase ATF from oil companies for a period of up to three years, subject to an annual review.
Fuel costs increase more than 2x in 2 months
International ATF prices have risen around them $60.50 per liter in March to approx $142 per liter in May, according to the government.
ATF represents approximately 40% of airline operating costs and can rise to as much as 60% during periods of extreme fuel price fluctuations.
The closure of Pakistani airspace to Indian airlines has also increased operating costs by forcing longer flight routes to Europe, North America and Central Asia, resulting in higher fuel consumption.
Expected benefits
The government said this measure will help reduce price fluctuations, support airline operations, and maintain local and international connectivity.
The scheme will also support employment across airlines, airports, maintenance providers, travel agencies, hospitality companies and logistics companies, officials said.
The government expects the initiative to benefit tourism, trade, regional connectivity and use of airport infrastructure, including facilities developed under the UDAN scheme.
