Indian airlines flag shutdown risk as jet fuel prices surge, seek urgent support

Amid ongoing disruption in fuel supplies linked to the West Asia conflict, India’s airline industry has urged the government to step in urgently as rising jet fuel prices begin to squeeze operations and weaken financial stability.

In a letter to the Civil Aviation Ministry, the Federation of Indian Airlines (FIA), which represents major carriers including Air India, IndiGo and SpiceJet, said the sector is under “extreme stress” due to a sharp increase in aviation turbine fuel (ATF) prices. The body warned that the current cost environment is making several routes commercially unviable and may force airlines to reassess capacity if prices remain elevated for a longer period.

ATF prices have recently crossed the Rs 2 lakh per kilolitre mark, tracking the surge in global crude oil triggered by tensions in West Asia. Fuel costs, which usually account for around 30–40% of an airline’s total expenditure, have now risen to nearly 55–60% of operating costs, according to industry estimates. This shift has significantly eroded profit margins across carriers.

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The FIA highlighted that airlines are finding it increasingly difficult to absorb the rising costs, especially on international routes where pricing flexibility remains limited. It added that sustained high fuel prices are also tightening cash flows, increasing financial pressure on already stretched balance sheets.

In its appeal, the industry body has sought both immediate relief and long-term structural reforms. As an urgent measure, it has requested the government to temporarily remove the 11% excise duty on ATF and encourage states to cut value-added tax, which in some regions can go up to 25%.

On the structural side, airlines have called for a more stable and transparent pricing framework for aviation fuel. They argue that volatility in refining margins and global “crack spreads” is keeping ATF prices high even when crude oil softens, creating a mismatch that disrupts planning and budgeting.

The FIA also pointed out that India’s relatively high fuel taxation places domestic carriers at a disadvantage compared to global competitors, particularly on international routes where competition is intense.

The current surge has been driven by geopolitical instability in West Asia, with concerns over supply routes such as the Strait of Hormuz adding further uncertainty to global oil markets. Airlines say this external shock is directly translating into higher operating costs.

If the trend continues, the industry has warned of possible fare increases, route rationalisation and capacity cuts. While airlines have so far absorbed part of the burden, executives say there is limited scope to continue doing so without affecting operations.

For passengers, the impact is likely to surface gradually through higher ticket prices and reduced frequency on less profitable routes.