Airlines Warn of Shutdown Risk Amid Soaring Fuel Costs

India’s aviation sector is facing a fresh financial challenge as steep increases in aviation turbine fuel (ATF) prices begin to impact both domestic and international flight operations. The surge in fuel costs has been driven by global geopolitical tensions and currency pressures, placing significant strain on airline operations. The Federation of Indian Airlines (FIA) has written a strongly worded letter to the Ministry of Civil Aviation, urging immediate government intervention. In its communication, the FIA warned that without prompt relief, airlines could be pushed to the brink of shutdown or operational suspension. The body, which represents major carriers such as Air India, IndiGo, and SpiceJet, attributed the heavy financial losses in April 2026 primarily to rising fuel costs and pricing imbalances. According to the FIA, while the government had capped the increase in domestic ATF prices at ₹15 per litre last month, international ATF prices witnessed a sharp jump of ₹73 per litre. This has created a significant disparity, making it extremely difficult for airlines to sustain both domestic and international operations, leading to mounting losses. The current pricing structure has also disrupted parity between domestic and international routes. The situation has been further aggravated by ongoing conflicts in West Asia, which have driven up Brent crude oil prices from $72 per barrel to $118 per barrel. Consequently, ATF prices have also surged sharply, at one point reaching $260 per barrel. Fuel costs now account for nearly 55–60% of total airline expenses, compared to the earlier 30–40%, the FIA noted. Airlines are currently operating under highly unstable and challenging conditions, grappling with rising fuel prices, restricted air routes, and geopolitical disruptions. The depreciation of the Indian rupee has added to the financial burden, while suppliers are demanding cost revisions due to higher petrochemical prices. In its appeal, the FIA has urged the government to restore stability in fuel pricing by reintroducing the earlier “crack band” pricing mechanism. This system, introduced post-COVID, was discontinued in December 2024 after prices stabilized. The FIA argued that current refinery margins are excessively high and do not reflect actual cost increases. Additionally, airlines have requested a temporary suspension of the 11% excise duty on ATF. They contend that the existing tax structure, which is levied as a percentage of fuel prices, significantly amplifies financial stress during periods of high prices.