Mumbai: Indian airlines have warned the union government that without immediate financial intervention, carriers will be forced to ground aircraft and cancel a significant number of flights, requesting to address the surge in aviation turbine fuel (ATF) charges. The Federation of Indian Airlines (FIA) have urged the union civil aviation ministry to reinstate the profit capping mechanism for oil marketing companies (OMCs), suspension of excise duty and reduction in value added taxes on jet fuel.
The federation, representing the country's major carriers including Air India, IndiGo and SpiceJet, has painted a grim picture of an industry under extreme stress in a detailed letter addressed to civil aviation secretary Samir Kumar Sinha. The federation noted that the combination of the West Asia War, the resulting volatility in crude oil, and a rapidly depreciating Rupee has pushed operational costs into a "non-operatable" zone, requesting to address an "unprecedented and unsustainable" surge in ATF prices.
"The airline industry in India is under extreme stress and is on the verge of closing down or stopping its operations," the FIA stated, highlighting that fuel costs have surged from the traditional 30-40% of operational expenditure to a staggering 55-60%.
The FIA expressed specific alarm over the "adhoc pricing" disparity introduced in April 2026. While the government capped the domestic ATF increase at Rs 15 per litre, prices for international operations were allowed to jump by Rs 73 per litre. The federation argued that this gap has rendered international networks unviable. The letter highlighted that global Brent Crude prices have climbed from $72 to $118 per barrel, but the OMCs’ profit margin on refining has skyrocketed by nearly 300%, reaching a high of $260.24 per barrel.
To prevent a total collapse of connectivity, the FIA has proposed a three-pronged emergency support package. It has called for a return to the crack band formula established in 2022, which caps the profit margins of OMCs during periods of extreme volatility. The FIA argued that since refining costs haven't risen proportionally, the current high prices represent pure additional profit for oil companies at the expense of airlines.
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The federation also requested a temporary suspension of excise duty to provide immediate liquidity relief. It noted that an 11% excise duty is levied on ATF for domestic operations currently and the tax burden has increased manifold as fuel prices rose. It has also sought a reduction in VAT in major aviation hubs like Delhi, Mumbai, Bangalore, Hyderabad, Kolkata and Tamil Nadu, ranging from 16% to 29%.
The FIA warned that if these measures are not considered, airlines will have no choice but to rationalise capacity, hinting at a sharp reduction in flight frequencies and the suspension of less profitable routes, particularly regional connections. "Any irrational increase in the price of ATF will result in insurmountable losses and will lead to the grounding of aircraft," the letter concluded.
