New Delhi, Jan 07: With war clouds looming large over Iraq, the airline industry in India will be hurt badly in case of a US attack which would lead to a massive increase in insurance premium and an additional burden of an estimated 25 per cent hike in aviation turbine fuel (ATF) prices. A war-risk insurance premium could be very high this time round, official sources said referring to the 1991 Gulf War and recalled that a huge premium of Rs 6 lakh per flight used to be paid for Indian Airlines' services to Kuwait at that time.

"The dollar-rupee exchange rate then was around Rs 10. But now with a rate of Rs 49-50 per dollar and a hike in insurance premium, even if it is maintained around the 1991 ratio, will impose a massive burden on the carrier," they said.
The increase in insurance burden would particularly hit the domestic carrier more on its Gulf operations where IA now operates many more flights than in 1991.

The aviation industry is already reeling under a war surcharge imposed by global insurance firms in the aftermath of the LTTE attack on Colombo airport and 9/11 terror strikes in the US in 2000. The ban on overflights imposed by Pakistan was also adding to the overall financial burden of IA.
The sources said just the announcement of a war could lead to a 10 per cent hike in the spot market price of ATF which could ultimately rise by almost 9-10 dollars or about 20-25 per cent. "ATF and motor spirit are not politically untouchable as kerosene and no subsidy can be expected on this count," they said. Bureau Report