NEW DELHI: Air passenger traffic, already under pressure, could decline further as major airlines have raised fuel surcharges this month, adding to travel costs. Ranging from Rs 375 on short domestic routes to Rs 21,000 on long-haul international flights, the revised charges are likely to hit price-sensitive domestic and leisure travellers hardest.
“With domestic traffic down 6.3% YoY in August 2026 and international traffic for Indian carriers declining 20.9% during April–August FY27, higher surcharges could further moderate demand. However, these declines also reflect airspace disruptions and capacity adjustments,” said Jainam Shah, Aviation Analyst at Equirus Securities. As per DGCA data, domestic traffic fell over 6% in August 2026 to 121.26 lakh passengers.
Shah added airfares have risen at least 20–25% since the onset of the West Asia crisis, driven by higher ATF prices, longer flight paths and airspace restrictions. He expects fares to remain elevated in the near term, particularly on disrupted international routes and during the festive season.
IndiGo’s fuel surcharge ranges from Rs 375 to Rs 10,000, depending on the route and sector while Air India and Air India Express’ fuel surcharge ranges between Rs 400 and $215 (Rs 20,855 in current rupee value). The move by the two major airlines comes amid a sharp surge in fuel prices triggered by the ongoing geopolitical tensions in the Middle East.
Kinjal Shah, Senior Vice President and Co-Group Head, Corporate Ratings, ICRA said that the revised fuel surcharge and the consequent increase in airfares are likely to keep the air passenger traffic trajectory under pressure, particularly as the overall demand environment remains subdued. For the full year, ICRA expects domestic air passenger traffic to grow by 3-6% in FY2027, while international traffic for Indian carriers is expected to decline by 3-6% YoY.
The trajectory will, however, remain dependent on how demand pans out during the festive season and on the evolution of the geopolitical situation.
Shah of ICRA said that airline yields increased by around 18% YoY in Q1 FY2027, while ATF prices were higher by 22.8% YoY during the same period, indicating that airlines were able to pass on part of the increase in fuel costs through higher fares.
“Cost pressures have persisted thereafter, with domestic ATF prices increasing by 18.0% YoY in July, 24.7% in August and 33.4% in September 2026, and any further sizeable pass-through of these costs through fare increases could continue to weigh on passenger demand,” she added.
After falling from Rs 115 per litre in June to Rs 110 in July, domestic ATF prices rose back to Rs 115 per litre in August and then to Rs 121 per litre on September 1. The prices were further increased to Rs 137 per litre for domestic airlines from October 1. The global average jet fuel price last week rose to $192.44/bbl, according to AITA’s jet fuel price monitor. It used to hover around $85 to $90 per barrel before the war began on February 28.
Given that ATF accounts for around 30–40% of airline operating costs, and recent fuel price increases could raise overall operating costs by 8–10%, before surcharge recovery and other offsets, airlines will have a tough period battling the headwinds. Besides fuel surcharges, Airspace restrictions further increase fuel burn while Rupee depreciation adds to the pressure, given airlines’ high dollar-denominated costs.
“Overall, these factors are likely to materially weigh on FY27 profitability, as higher fares and surcharges may not fully offset rising costs without dampening demand,” said Jainam Shah of Equirus.
Kinjal Shah of ICRA said that elevated ATF prices, depreciation of the INR against the USD, airspace-related disruptions and higher lease rentals are expected to keep airline cost structures under pressure. ICRA forecasts that the Indian aviation industry could report a net loss of Rs 36000-38000 crore in FY2027, compared with an estimated net loss of Rs 28000-30000 crore in FY2026.
The rise in jet fuel prices and fuel surcharges will also impact how people travel. “While higher airfares may influence destination choices and budgets, the appetite for travel remains and we continue to see interest in holiday travel for the winter season. Against this backdrop, travellers are also seeking greater reassurance and flexibility when planning their holidays,” said Abraham Alapatt, President & Group Head – Marketing, Service Quality, Value Added Services & Innovation, Thomas Cook (India) Limited & SOTC Travel.