Jet fuel prices surge, airlines seek government relief as costs mount

India’s aviation sector has raised alarm over a sharp rise in aviation turbine fuel (ATF) prices, with major airlines urging the government to step in and provide relief as operating costs surge.

Industry body Federation of Indian Airlines (FIA), which represents carriers such as Air India, IndiGo and SpiceJet, has written to the government seeking intervention, warning that the current pricing environment is placing the sector under “extreme stress” and threatening operational viability.

ATF, or jet fuel, is the single largest expense for airlines, typically accounting for around 30–40 per cent of total operating costs. With recent increases, this share has risen significantly, putting pressure on already thin margins.

Airlines have flagged that both domestic and international operations are becoming increasingly unviable due to the sustained rise in fuel prices. In communications to the government, carriers warned that without immediate support, the industry could face severe disruption, including the possibility of scaling down or suspending operations.

The latest surge in ATF prices has been linked to global factors, particularly tensions in West Asia, which have pushed up crude oil prices and disrupted supply chains. These developments have had a direct impact on jet fuel costs in India.

Recent revisions illustrate the scale of the increase. While the government capped the rise in ATF prices for domestic operations at around ₹15 per litre, prices for international operations saw a much steeper jump, making several routes financially unviable for airlines.

Airlines have also pointed to a mismatch between global crude prices and domestic ATF pricing, arguing that fuel costs remain elevated even when crude prices soften, complicating financial planning and cost management.

To address the situation, the industry has proposed a series of measures, including a reduction in excise duty on ATF and rationalisation of state-level value-added tax (VAT), which can be as high as 25% in some regions.

Carriers have also sought a more predictable pricing mechanism for jet fuel, suggesting reforms that would better align ATF prices with global crude trends while ensuring stability in operational costs.

The financial strain is already beginning to reflect in operational decisions. Airlines have indicated that sustained high fuel prices could lead to route rationalisation, reduced capacity and potential fare increases for passengers.