Indian airlines are facing mounting financial pressure as the continuing West Asia conflict pushes up fuel expenses, disrupts flight routes and adds to several other operating costs. The Federation of Indian Airlines (FIA), which represents Air India, IndiGo and SpiceJet, has approached the Ministry of Civil Aviation with a series of requests aimed at reducing the financial burden on carriers. In a letter dated September 25, the industry body sought changes to the way aviation turbine fuel is priced, a review of the tax structure on jet fuel, lower state-level levies and an extension of temporary relief on airport charges. The association has warned that airlines are dealing with several pressures at the same time. These include higher ATF prices, longer flight paths because of airspace restrictions, additional crew expenses, lower aircraft utilisation and the impact of a weaker Indian rupee.

Why are airlines asking for fuel relief?

Fuel is one of the biggest expenses for any airline, and the current situation has significantly changed the cost structure faced by Indian carriers. According to the FIA, fuel historically accounted for around 30% to 40% of an airline's operating expenses. Under the current circumstances, that share has increased to roughly 55% to 60%. That means a much larger portion of an airline's revenue is now being consumed by fuel-related expenses before other costs such as aircraft leasing, maintenance, crew, airport services and insurance are taken into account. The Federation of Indian Airlines has therefore asked the government to reconsider the existing ATF pricing mechanism for domestic operations.

ATF prices have become a major concern

The FIA has pointed to a sharp rise in crude oil and aviation fuel prices since the West Asia crisis intensified. In its submission, the industry body said Brent crude had increased from around $72 per barrel to $118 per barrel. It also said the relevant aviation fuel benchmark had climbed sharply, reaching $260.24 per barrel at its peak before subsequently falling to around $175.33. The association has also highlighted the widening difference between crude oil prices and the benchmark used for aviation fuel. According to FIA, this difference, commonly referred to as the crack spread or crack differential, has moved far above its earlier range. The industry body believes the unusual increase has contributed to the financial strain being experienced by airlines. The association is consequently asking the government to review the formula instead of leaving carriers fully exposed to international fuel market volatility.

Airlines also want changes to ATF taxation

Fuel pricing is not the only concern raised by the airlines. FIA has also requested changes in the way excise duty on aviation turbine fuel is calculated. At present, the duty is percentage-based, meaning that when the underlying fuel price increases, the tax burden can also rise. The association has asked the government to consider replacing the percentage-based structure with a fixed-rate levy. The argument is that a fixed charge could provide greater predictability during periods of extreme price volatility. It could also prevent the tax component from increasing automatically whenever the price of aviation fuel rises sharply. For airlines already dealing with higher fuel bills, such changes could have a direct effect on overall operating costs.

VAT relief sought in several states

FIA has also raised the issue of state-level taxes on ATF. The association has requested that the 7% VAT rate currently applicable to aviation turbine fuel in Delhi and Maharashtra continue beyond its present validity period in November. It has also asked the central government to engage with other states, including Tamil Nadu, West Bengal, Karnataka and Telangana, for similar reductions. State taxes are an important part of the final fuel bill paid by airlines. Because ATF is one of the largest individual expenses in airline operations, even relatively small changes in the tax component can have a noticeable impact when fuel prices are already elevated. The airlines argue that coordinated relief could help reduce the cost burden across major aviation markets and support the continuation of air services.

Why are flight routes becoming more expensive?

The financial pressure on airlines is not coming only from fuel prices. The airspace restrictions created by the regional conflict have forced some airlines to modify their normal flight paths. Longer routes mean aircraft spend more time in the air and consume more fuel. Longer journeys can also increase crew expenses. At the same time, aircraft that remain airborne for longer periods may complete fewer sectors in a day, reducing their overall utilisation. For an airline, these changes can create a chain reaction. A longer international flight can require more fuel, additional crew planning, revised schedules and changes to aircraft rotations. The FIA has said these factors are contributing significantly to the current increase in operating expenses.

Weak rupee adds another layer of pressure

Indian airlines are also dealing with the impact of currency movements. A significant number of aviation-related expenses are linked directly or indirectly to the US dollar. Aircraft leases, maintenance, insurance and several other international payments can become more expensive in rupee terms when the domestic currency weakens. This means airlines are facing pressure from both sides: fuel prices are increasing while some dollar-linked expenses are also becoming costlier in domestic currency terms. For carriers operating international routes, the combination can be particularly difficult because longer routes and higher fuel consumption add to expenses while demand and ticket pricing may not immediately adjust at the same pace. The FIA has cited the weaker rupee as one of the factors contributing to the current financial pressure on airlines.

FIA asks for 25% airport charge relief

Another major request concerns landing and parking charges. The FIA has asked the government to restore a 25% reduction in landing and parking charges for domestic flights. The earlier concession was introduced for a limited period and expired on July 7, 2026. Airlines now want the reduction to be extended for as long as the West Asia crisis continues and operating conditions remain abnormal. According to the industry body, extending this relief would help carriers absorb some of the additional expenses created by longer flight routes, higher fuel consumption and operational disruptions. The request is also linked to the wider concern that airlines cannot simply increase fares every time their costs rise. A reduction in airport charges could therefore provide some immediate relief without requiring the entire additional cost to be passed on to passengers.

Can airlines simply increase ticket prices?

One of the most important questions for passengers is whether higher airline costs will automatically result in more expensive tickets. The answer is not straightforward. Airlines can adjust fares and introduce fuel-related charges, but their ability to recover all additional costs is limited. Many passengers purchase tickets well in advance, meaning that airlines cannot retroactively increase the price of an already-booked ticket. At the same time, airlines have to consider passenger demand. A significant increase in fares can discourage travel, particularly on price-sensitive routes. This leaves carriers in a difficult position. They need to cover rising expenses while maintaining competitive fares and keeping aircraft flying on commercially viable routes.

Airlines warn about pressure on routes

The FIA has also warned that prolonged financial pressure could affect the sustainability of some routes. If the cost of operating a particular service rises significantly while passenger revenue remains insufficient to cover the expense, airlines may have to reconsider the frequency of flights or the continuation of certain services. The association has indicated that timely government support could help prevent such a situation and allow airlines to maintain connectivity. This is particularly important for routes connecting major cities with smaller markets. Any reduction in services could affect business travel, tourism, students, workers and families who depend on air connectivity.

What has the government already done?

The latest FIA request comes against the backdrop of several government measures taken during the West Asia fuel shock. In June 2026, the Union Cabinet approved up to ₹10,000 crore in one-time budgetary support for oil marketing companies to provide ATF price stabilisation support to scheduled Indian airlines. The mechanism was designed to provide greater predictability in fuel costs while shielding oil marketing companies from losses associated with elevated international ATF prices. The government said the arrangement would also help protect air connectivity and reduce the extent to which sudden fuel price increases are passed on to passengers. However, airlines are now seeking additional measures because the financial pressures have continued, with fuel prices, airspace disruptions and other operating costs remaining elevated.

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What could happen to airfares and flights?

The immediate concern for passengers is whether the cost pressure will lead to further increases in airfares. There is no single answer because ticket prices depend on several factors, including route demand, competition, fuel costs, aircraft availability and the duration of the disruption. However, continued high fuel expenses increase the pressure on airlines to recover at least part of the additional cost through fares or separate fuel charges. If the situation persists, airlines may also have to reassess international routes where longer flight paths make operations significantly more expensive. The FIA's warning about potentially withdrawing from unsustainable routes shows that the issue is not limited to short-term ticket pricing. It could also influence airline network planning and the availability of certain services if the cost environment remains difficult.

West Asia crisis puts Indian aviation under pressure

The current situation highlights how closely the Indian aviation industry is connected to global energy prices and international developments. A rise in crude oil prices can quickly affect jet fuel costs. Restrictions on airspace can increase flying time. A weaker rupee can raise the domestic cost of dollar-linked expenses. Together, these factors can significantly change the economics of operating an airline. For the government, the challenge is to provide targeted support without creating long-term distortions in fuel pricing or airport economics. For airlines, the priority is to keep operations financially sustainable while maintaining connectivity and avoiding excessive increases in passenger costs.