Airlines yet to translate lower jet fuel sales tax into reduced fares

Similarly, state-run National Aviation Company of India Ltd (NACIL) has also refrained from lowering airfares. “Airlines are bleeding. There is a large mismatch on total fuel cost and recoveries by way of fuel surcharge. So, even if a couple of states lower sales tax on jet fuel, there is not much cost benefit,” said NACIL executive director (corporate communications) Jitender Bhargava. “Unless all major airports also reduce their sales tax, passing on any saving makes no sense since it isn’t significant enough.”

While airlines claim that fuel bills have not been significantly impacted by low sales tax, they are nonetheless lining up at airports in these states. More than 100 flights refuel at the newly-opened Hyderabad International Airport everyday, enabling them to save 15-20 per cent on fuel costs, which constitute over 40 per cent of the airlines’ overall operating costs.

Meanwhile, the Civil Aviation Ministry has again pleaded with state finance ministers to reduce sales tax on ATF to 12.5 per cent instead of 4 per cent that it had earlier demanded. If agreed to, airlines would save around 5 per cent on operating costs, but the benefit would be greater in locations with higher air traffic like Delhi, which accounts for 20 per cent of the total fuel uplift by all airlines.