More flight reductions likely if jet fuel prices remain high, says IATA

India setting up the ATF price stabilisation fund is a very good solution to address the problem of higher jet fuel costs being faced by the domestic airlines, a senior IATA executive has said.

While mentioning that the current jet fuel scenario globally is unprecedented in terms of the cost impact, Hemant Mistry, Director Energy Transition at IATA, cautioned that if the situation continues, there would have to be more flight reductions.

The International Air Transport Association (IATA) represents over 370 airlines, including Air India, IndiGo, Air India Express and SpiceJet. The grouping accounts for around 85 per cent of the global air traffic.

Mistry said the jet fuel situation in terms of cost impact is unprecedented.

"If the situation continues, there will have to be more demand destruction... that is the only way to manage the situation, it is an extreme situation," he told PTI.

Demand destruction broadly refers to a reduction in flights amid rising operational costs, driven by higher jet fuel prices.

He was speaking on the sidelines of the IATA AGM in the Brazilian city.

Mistry said the jet fuel prices are dissociated from the prices of crude. "We have seen that average price of jet fuel increased from $96 per barrel in November last year to $188 per barrel in April this year and has settled at around $156 per barrel."

According to him, the Indian government's decision to set up an up to ₹10,000 crore ATF (Aviation Turbine Fuel) price stabilisation fund will address the problem of rate uncertainties faced by airlines.

"The ATF price stabilisation fund is a very good solution to address the problem. It is a very good output from the government," he said on Saturday.

The fund for Oil Marketing Companies (OMCs) would help provide ATF price stabilisation support to scheduled Indian airlines for their domestic and international operations.

With surging jet fuel prices as well as relatively lower demand, IndiGo, Air India and Air India Express have temporarily curtailed their networks.

Regarding the ATF price stabilisation fund, Sheldon Hee, Regional Vice President Asia Pacific at IATA, said any support that the industry gets from the government is welcome.

"We also recognise that there are different dynamics (for domestic airlines) that ensure connectivity between cities in the country.

"Our position is only that we would like the governments to appreciate the challenges that the industry faces as a whole and to consider policies that are supportive," he said.

(Except for the headline, Fortune India has not edited the content of this PTI report.)