Airlines warn of shutdown risk as fuel costs surge, seek tax cuts and urgent relief

28 April, 2026
Airlines warn of shutdown risk as fuel costs surge, seek tax cuts and urgent relief

Winning Bizness Desk

Mumbai. Air travel in India may soon become costlier as a steep rise in aviation turbine fuel prices pushes airlines to the brink. With operational costs rising sharply, major carriers have warned that sustaining services is becoming increasingly difficult. The latest spike in fuel rates has significantly strained the aviation sector, raising concerns over reduced flight availability and higher fares for passengers.

Fuel price surge pushes airlines to edge

In April, oil marketing companies increased domestic ATF prices by 9.2 percent, intensifying pressure on airline finances. The Federation of Indian Airlines, representing carriers such as Air India, IndiGo and SpiceJet, has flagged the situation to the Civil Aviation Ministry. The body has warned that airlines are nearing a point where continuing operations may no longer be viable.

Key concerns highlighted by airlines include:

  • Sharp rise in fuel prices impacting daily operations
  • Growing financial instability across domestic networks
  • Risk of grounding aircraft due to mounting costs

Fuel share in costs rises sharply

According to the federation, fuel now accounts for nearly 60 percent of total operational costs, compared to around 40 percent earlier. This sharp increase has disrupted financial planning for airlines. The disparity between international and domestic fuel pricing has further weakened the sustainability of route networks.

Airlines seek tax relief and pricing reform

The industry body has placed three key demands before the government to ease the burden. These include suspension of 11 percent excise duty on ATF, reduction in state-level VAT, and reinstatement of the crude Brent pricing mechanism introduced in 2022 after the Covid-19 pandemic.

Main demands include:

  • Temporary suspension of excise duty on ATF
  • Reduction in VAT by major states
  • Reintroduction of Brent-linked pricing system

Crude oil rally drives aviation fuel spike

Global crude oil prices have surged by 45.5 percent since February 28, largely due to the ongoing conflict between the United States and Iran. While the government capped the rise in domestic ATF prices at 25 percent, international fuel costs have seen a far steeper increase.

International fuel costs rise steeply

Data shows that domestic ATF prices were capped at an increase of about Rs 15 per litre. However, for international operations, prices surged by nearly Rs 73 per litre. In global markets, ATF prices have jumped from 87.24 dollars per barrel to over 235 dollars per barrel, significantly raising operational expenses for airlines flying overseas routes.

Possible outcomes if crisis continues:

  • Reduction in number of flights across routes
  • Higher airfares for domestic and international travel
  • Disruptions in regional and tier-2 connectivity

Government weighs relief measures for sector

In response to the crisis, the Civil Aviation Ministry has already reduced landing and parking charges by 25 percent for a three-month period starting April 2026. Additionally, the government is considering a Rs 5,000 crore emergency airline credit scheme to support cash flow and stabilise operations.

Key relief steps under consideration:

  • Temporary cut in airport-related charges
  • Proposed emergency credit support of Rs 5,000 crore
  • Measures aimed at improving airline liquidity and continuity>/li>

Capacity cuts and fare hikes likely

Industry experts warn that if the situation persists, airlines may be forced to cut capacity and reduce flight frequency. This would directly affect passenger connectivity and could lead to a sharp rise in ticket prices in the coming months.