If oil prices do not climb down and government policies on ATF pricing maintain status quo, the air traveler can expect a wet blanket over leisure and business travel. But more significantly, the coming months may prove to be testing times for private airlines and survival could well become an issue. Group Captain A.K. Sachdev from Bangalore elaborates.

A historic aviation event occurred last month. Sasol Limited, the world’s leading producer of synthetic fuels from coal and natural gas, announced that it had become the first company worldwide to receive international approval for 100 per cent synthetic jet fuel produced by its proprietary coal-to-liquids process.

This was the first time ever that such a fuel had been approved for commercial aviation use. Having met the performance standards that aviation quality control demands, the synthetic fuel demonstrated a cleaner burn quality than Aviation Turbine Fuel (ATF). However, overshadowed by a pall of gloom over the closure of several airlines worldwide, the significant event went largely unnoticed.

In the last few weeks, ATA Airlines, Aloha Airlines, Skybus and charter carrier Champion Air in the US have shut down while Delta Airlines debated a merger, possibly with Northwest Airline. In Europe, Alitalia struggled to survive, teetering on the edge of collapse or a bale out. Closer home, Oasis Airline, operating out of Hong Kong since October 2006, ceased operations last month, stranding thousands of passengers in Hong Kong, Britain and Canada. Although there were other causes for these airlines to fold up, the factor that tilted the balance was the rising cost of aviation fuel.

With the falling dollar and speculation in oil becoming attractive, all indicators point towards an oil price well above the $100 (Rs 3,988) mark in the coming months. Reports in the US media would have the world believe that the upward trend in oil prices is fuelled (pun intended) by the increased demand from India and China. Whether that is true or not does not change the fact that the woes of airlines across the world can be expected to keep them working feverishly to combat the rising fuel prices. Government policies across the globe are differentially inclined towards airlines in their respective domains. In India, the airlines are one of the worst affected. This article looks at the threat to the Indian airline industry on account of current fuel pricing policies.