Steepest India Fuel Price Increase Adds to Airline Restart Woes

(Bloomberg) -- It's a tale of unending agony for India's battered aviation industry.

Even as domestic airlines cope with challenges to take to the skies after a two-month hiatus, they've been struck by another bolt from the blue: The South Asian nation's biggest fuel supplier Indian Oil Corp. increased the price of jet fuel by the steepest on record effective Monday.

The higher price adds to the operational overhead of airlines because fuel comprises as much as half the cost of flying a jet. While the increase was imminent after a recovery in oil prices, it's unwelcome for airlines seeking to get airborne again.

India, which allowed airlines to resume domestic flights from May 25, has put restrictions on fares and capacity deployed making their viability more difficult at a time when the industry's recovery is seen to be long and slow.

To be sure, while the increase of 56.5% is the sharpest, it comes after six consecutive reductions since February that took the price to its lowest since at least since 2005. So, even after the escalation, the rate for aviation turbine fuel in Delhi is at a multiyear low.

S&P Global Ratings analysts expect global air passenger numbers to drop as much as 55% this year and stay below pre-pandemic levels through 2023. In India, close to 3 million jobs in aviation and related industries could be lost this year because of the virus outbreak, as well as more than $11 billion in revenue, according to the International Air Transport Association.

India is one of the world's fastest-growing aviation markets, with low-cost operators like InterGlobe Aviation Ltd.'s IndiGo and SpiceJet Ltd. cornering the bulk of local air traffic.