Indian Aviation Sector Warns Of Mounting Crisis As Soaring Jet Fuel Prices Push Sector Under Severe Strain

India’s leading carriers have warned they could be forced to halt operations unless urgent steps are taken to ease soaring fuel costs, with the Federation of Indian Airlines saying the sector is under severe strain. In a letter to the Ministry of Civil Aviation, the group—whose members include Air India, IndiGo, and SpiceJet—said current aviation turbine fuel prices, driven higher in part by the West Asia crisis, have pushed airlines to the brink, prompting calls for immediate government intervention.

Mounting Pressure On Operations

In its communication, the Federation of Indian Airlines described the situation in stark terms, warning that carriers are struggling to stay afloat as costs surge. “The airline Industry in India is under extreme stress and is on the verge of closing down or of stopping its operations. The dire condition of the Aviation Sector has been exacerbated by the West Asia War and the exorbitant increase in the price of ATF,” the letter reads.

The group said a sharp rise in fuel prices has dealt a heavy blow, particularly to overseas routes. “The ATF pricing for international operations was increased by INR 73 per litre, making practically international operations along with domestic operations completely unviable and resulting in significant losses for the aviation sector in April 2026,” it said.

It also flagged imbalances in pricing between routes, adding: “The April’26 pricing outcomes do not ensure parity between domestic and international operations.”

Fuel Shock And Global Fallout

The Federation of Indian Airlines linked the latest spike in aviation turbine fuel prices to a wider disruption in global energy markets, tied to the conflict involving the United States, Israel, and Iran. It pointed to the knock-on effects of the blockade in the Strait of Hormuz, a key route for a significant share of the world’s energy supplies, as a major factor behind the surge.

Detailing the scale of the increase, the body said: “The current conflict has pushed the Brent Crude from USD 72 / BBL to USD 118 / BBL, and resultant ATF price (MOPAG + Premium) has moved from USD 87.24 and touched a high of USD 260.24 / BBL (295 per cent increase) and is currently trading at USD 235.63 / BBL, significantly higher as compared to March ’25 pricing.”

It also drew attention to currency pressures, noting: “Add to this, the Rupee has also depreciated further to its lowest level, adding additional burden on Airlines in terms of ATF Pricing.”

Taking aim at the pricing system, the federation added: “ATF ad hoc pricing is creating a severe imbalance in domestic and international operations and rendering airline networks unviable and unsustainable.”

Calls For Tax Relief And Pricing Reforms

The Federation of Indian Airlines has suggested a set of measures to ease the strain on carriers, including bringing back the earlier crack band pricing formula and pausing excise duty on aviation turbine fuel for domestic services. It has also sought cuts in VAT in key regions such as Delhi and Tamil Nadu.

The body pointed out that major hubs, including Mumbai, Bengaluru, Hyderabad, and Kolkata, continue to levy VAT between 16 and 20 per cent, even though they account for a large share of airline traffic.

It said a more consistent approach to pricing and taxation would help restore balance across operations, adding: “Applying the same framework consistently will ensure parity, reduce the financial burden and enable Indian airlines to compete more effectively with global counterparts.”

Understanding ATF

• What ATF is: Aviation turbine fuel, or jet fuel, is a refined kerosene used in aircraft turbine engines. Commonly known as Jet A-1, it is designed to perform under extreme conditions at high altitudes and forms the backbone of both commercial and military aviation.

• Why prices have climbed: Costs in India have risen sharply—crossing INR 2 lakh per kilolitre—on the back of higher global crude prices, tensions in West Asia affecting routes such as the Strait of Hormuz, and a weaker rupee that has made imports more expensive.

• Impact on airlines: Fuel now makes up as much as 55–60 per cent of airline operating expenses, compared with 30–40 per cent earlier, with added pressure from taxes such as excise duty and state-level VAT pushing overall costs higher.

FAQs

What is the issue raised by airlines?
The Federation of Indian Airlines says rising aviation turbine fuel (ATF) costs are placing heavy pressure on airlines and threatening operational stability.

What is ATF?
ATF, or jet fuel, is a kerosene-based fuel used in aircraft engines and is the biggest cost component for airlines.

Why are airlines concerned about it?
Prices have climbed above 2 lakh per kilolitre, and airlines say taxes, currency weakness and global conditions have pushed costs to unsustainable levels.

How does ATF pricing affect airfares?
When aviation turbine fuel becomes more expensive, airlines often pass on a portion of the higher operating costs to passengers through increased ticket prices, especially on longer or international routes.

Is ATF taxed in India?
Yes. ATF in India is subject to multiple layers of taxation, including excise duty and state-level VAT, which can vary significantly across regions and add to overall fuel costs for airlines.