In its communication to the government, the FIA stated that the industry is “on the verge of closing down or stopping operations,” as escalating fuel costs have made both domestic and international flights increasingly unviable. The situation has worsened significantly in April 2026, with airlines reporting substantial operational losses.
A key concern raised by the federation is the steep increase in ATF prices—reportedly up by ₹73 per litre for international operations. This surge has rendered international routes financially unsustainable while further straining domestic services. The FIA emphasized that current pricing mechanisms fail to maintain parity between domestic and international operations, deepening the industry’s challenges.
The crisis is closely linked to global geopolitical tensions, particularly the ongoing conflict in West Asia involving the United States and Israel against Iran. The situation has disrupted global oil supply chains, including a blockade of the strategically critical Strait of Hormuz, through which nearly 20% of the world’s energy supply passes.
As a result, Brent crude prices have surged dramatically from approximately $72 per barrel to $118 per barrel. Consequently, ATF prices have spiked from $87.24 per barrel to a peak of $260.24 per barrel—an increase of nearly 295%. Although prices have slightly eased to around $235.63 per barrel, they remain significantly higher than previous levels.
Fuel expenses, which traditionally account for 30–40% of airline operating costs, have now ballooned to 55–60%. Compounding the issue is the depreciation of the Indian rupee, which has further increased the cost burden for airlines importing fuel.
In response to the crisis, the FIA has proposed several immediate measures to the government. These include reinstating a pre-agreed formula for crack spreads—the margins refineries earn on converting crude oil into fuel—temporarily deferring the 11% excise duty on ATF for domestic operations, and reducing value-added tax (VAT) in key states.
The federation pointed out that major aviation hubs such as Mumbai, Bengaluru, Hyderabad, and Kolkata impose VAT rates between 16% and 20%, despite accounting for over half of India’s airline operations. Rationalizing these taxes, the FIA argued, would help ease financial pressure and improve competitiveness against global carriers.
The aviation industry has urged swift government intervention, warning that without immediate relief measures, the sector could face widespread disruptions, impacting connectivity, employment, and economic growth.
