NEW DELHI: Days after major airlines wrote to the Centre saying they were on the verge of shutting down operations due to a sharp rise in aviation turbine fuel (ATF) prices, industry experts said the impact on the aviation sector is significant and fuel surcharges alone may not fully offset the pressure.
Ashish Chhawchharia, Partner and Aviation Industry Leader, Grant Thornton Bharat, said the crisis is severely affecting airlines, though the exact impact is difficult to quantify at this stage.
He said carriers are expected to reduce operations during non-peak periods and on lighter load sectors, especially regional flights, as they weigh high operating costs caused by elevated ATF prices against expenses such as lease payments, staff salaries, parking and maintenance.
“While many airlines have revised fuel surcharges to cushion the blow, these measures only partially offset the surge in fuel costs. The industry is under pressure to balance financial sustainability with service continuity. This makes government intervention increasingly critical to prevent deeper losses and widespread disruption,” said Chhawchharia.
Kinjal Shah, Senior Vice President and Co-Group Head, Corporate Ratings, ICRA Limited, said the Indian aviation industry is facing several challenges and fuel surcharges provide only partial relief.
“Airlines have implemented airfare increases of around 5-6%, enabling limited pass-through of elevated ATF prices. However, fuel accounts for a significant 30-40% of operating expenses, and the recent sharp increase in ATF prices has exerted material pressure on overall cost structures…steep fare increases carry the risk of demand softening, particularly following the removal of fare caps. Consequently, while fuel surcharges offer some relief, they may not fully offset the impact of elevated ATF prices, and margin pressures are likely to remain in the near term,” added Shah.
To reduce the impact of higher ATF prices, the Federation of Indian Airlines (FIA), which represents IndiGo, Air India and SpiceJet, has sought government intervention.
The airlines have asked for the same fuel pricing mechanism to be applied uniformly for both domestic and international operations, as was done earlier through the crack band system.
They have also sought a temporary suspension of excise duty, currently at 11 per cent on ATF, and lower VAT rates in key states.
The aviation sector is already facing losses due to frequent airspace closures in West Asia, permanent airspace closure in Pakistan since May last year, and the depreciation of the rupee against the dollar. The sharp rise in ATF prices has added to the pressure.
According to early estimates, airlines are expected to report record losses in the financial year 2025-26. Reports said Tata Group’s Air India losses rose to Rs 22,000 crore in FY26, the highest in a single fiscal.
As global jet ATF prices more than doubled to 180-190 dollars per barrel after the war in West Asia began on February 28, the government last month limited the hike to Rs 15 per litre for domestic operations. However, for international operations, the price increased by Rs 73 per litre.
ATF prices usually account for 30-40 per cent of an airline’s operating cost. After the April hike, this rose to 55-60 per cent, according to FIA.
Earlier this month, IndiGo and Air India revised their fuel surcharges. Air India increased fuel surcharge on domestic routes by up to Rs 899 and on international routes by up to 280 dollars. IndiGo raised fuel charges by up to Rs 950 for domestic flights and up to Rs 10,000 for international flights.
