Airfares will come down from elevated levels once more capacity is added, and jet fuel prices cool down, said Nipun Agarwal, chief commercial officer of Air India. Ticket prices have surged sharply over the last 3-4 months in the wake of the West Asia crisis, which pushed up oil prices worldwide. The geopolitical tussle and its impact on energy prices and airspace in the region also forced airlines to cut down their capacity to tide over operational challenges.
“Airfares are market-driven, they move up and down with the demand and supply, and oil prices. So as the flights come back, and the oil prices cool down, airfares will naturally come down as well. We don't fix the airfare. We fix the price points, while the market determines at which price point the ticket is sold,” said Agarwal on the sidelines of the FAITH Tourism Conclave in New Delhi.
According to Agarwal, demand remains strong in domestic and short-haul routes, but in the long haul, demand has been impacted.
Agarwal added that the Pakistan airspace closure, in effect since March 2025, remains a big concern. “I think the airspace between Iran and Iraq should be resolved soon. So that will provide a lot of relief. Pak airspace closure is an issue where we have no visibility right now. We are trying to rebalance what we can do. But beyond that, we have to live with it. If the issue remains for a long time, then it will remain an issue. But we are hoping that, like in the past, this will not be an issue in the long run,” he said.
He also said that the oil pricing situation remains very volatile. Global energy prices, including prices of jet fuel, have gone up dramatically since tensions broke out in West Asia on February 28. The global average jet fuel price peaked at about $225/barrel in April 2026, and at present it is hovering around $127/barrel, as pet IATA. Domestic ATF prices have also seen a spike despite a minor cut earlier this month.
Aviation fuel accounts for nearly 35-40% of an airline's operating expenses, making fluctuations in ATF prices a key determinant of profitability and airfares.
He also said that the airline will resume operating at normal capacity from September. “We had cut the capacity for early June, July and a little bit of August. For September, most of the flights are already on sale; they were never withdrawn,” he added.
The Tata Group airline had earlier announced a 27% reduction in its international flights. The airline has also temporarily reduced 22% of its domestic flights. The decision to cut operations came after the airline incurred record losses last financial year.
