Air India, IndiGo And SpiceJet Issue ATF Price SOS To Govt, Warn Of Shutdown Risk

New Delhi, India: India’s aviation sector has issued a fresh urgent appeal to the Centre seeking immediate intervention on aviation turbine fuel (ATF) pricing, just two days ahead of the scheduled fuel price revision, as escalating costs threaten the financial viability of airline operations. The representation has been made by the Federation of Indian Airlines (FIA), which represents major carriers including Air India, IndiGo and SpiceJet. In a formal communication to the Ministry of Civil Aviation, the body flagged that the industry is facing severe financial stress due to sustained increases in fuel costs.

In one of the strongest warnings in recent years, the FIA stated that the airline industry in India is under extreme stress and is on the verge of closing down or stopping operations. In its April 26 letter, the industry body further cautioned that urgent intervention is required to continue airline operations.  

In its letter to MoCA, the FIA wrote: “In order to ensure uninterrupted operation of airlines within India, FIA earnestly requests the Ministry’s urgent intervention to review the ATF cost challenges in consultation with the relevant Ministries and stakeholders and also respectfully request the Government to extend the same fuel pricing mechanism uniformly across both domestic and international operations as was done in the past with the establishment of Crack (margin) Band. Applying the same framework consistently will ensure parity, reduce the financial burden and enable Indian airlines to compete more effectively with global counterparts.” 

The immediate trigger for the alarm is the sharp rise in ATF prices, which have now crossed ₹2 lakh per kilolitre in recent revisions, driven by global crude oil volatility linked to geopolitical tensions in West Asia. This marks a steep escalation from earlier in April, when ATF prices in Delhi rose 8.5% to ₹1,04,927 per kilolitre, up from ₹96,638.14. Airlines have also highlighted disparities between domestic and international fuel pricing, noting that while domestic ATF price increases were capped at ₹15 per litre, international operations faced a significantly higher increase of ₹73 per litre.

The FIA has pointed to a dramatic shift in airline cost structures, noting that ATF, which earlier accounted for 30-40% of operating costs, has now surged to 55-60% of total expenses. This sharp increase has compressed margins, made several routes particularly international sectors financially unviable, and intensified cash flow pressures across airlines. Carriers have also stated that they are struggling to absorb rising costs, especially in markets where pricing flexibility remains limited due to intense competition.

In its submission, the FIA has sought both immediate relief and long-term structural reforms. Among the immediate measures requested are the temporary removal of the 11% excise duty on ATF and a reduction in state-level value-added tax (VAT), which can go up to 25% in Delhi and as high as 29% in Tamil Nadu. The industry body has also called for the introduction of a transparent and predictable pricing mechanism, including the reinstatement of a “crack band” system with a refining margin range of USD 12–22 per barrel to stabilise fuel costs.

Airlines have further mentioned a pricing mismatch in the ATF ecosystem, pointing out that fuel prices remain elevated even when global crude oil prices soften, due to high refining margins or “crack spreads.” This disconnect, they say, has made route planning, pricing strategies and capacity deployment increasingly challenging.

The current surge in fuel prices is largely attributed to global developments, including geopolitical tensions in West Asia that have pushed crude oil prices higher and raised concerns over critical supply routes such as the Strait of Hormuz. Additionally, airspace restrictions linked to regional conflicts have increased operational costs, particularly for long-haul international flights.

Airlines have warned that if fuel prices remain elevated, the industry may be forced to rationalise routes, reduce capacity and increase airfares. While carriers have so far absorbed part of the cost increase, industry executives indicate that this approach is not sustainable in the long term. As a result, passengers could soon face higher ticket prices, reduced flight frequencies and limited connectivity on marginal routes.

The FIA has emphasised that the issue has now moved beyond rising costs to a broader concern over the viability of airline operations in India. With the next ATF price revision imminent, the industry’s latest appeal reflects mounting financial pressure and signals one of the most critical stress phases for Indian aviation since the pandemic, placing urgent focus on government intervention.