India’s aviation sector has sounded an alarm over surging fuel costs, warning that current pricing conditions have made airline operations “unviable and unsustainable,” and could force carriers to cut capacity or suspend services if urgent relief is not provided.

In a letter to the government dated April 26, the Federation of Indian Airlines (FIA), which represents major carriers including Air India, IndiGo and SpiceJet, flagged a sharp spike in aviation turbine fuel (ATF) prices amid rising crude oil costs and geopolitical disruptions.

“The airline industry in India is under extreme stress and are on the verge closing down or of stopping its operations,” the FIA said in its letter, attributing the situation to the “West Asia war and the exorbitant increase in the price of ATF.”

Fortune India has reveiwed a copy of the letter.

Fuel costs surge, business model under strain

According to the letter, ATF prices have risen disproportionately compared to crude oil. While Brent crude has climbed from around $72 per barrel to $118, ATF prices have jumped nearly threefold—from $87 per barrel to as high as $260 per barrel.

This has pushed fuel costs from about 30–40% of airline expenses to as much as 55–60%, creating what the industry described as “completely non-operatable conditions.”

The FIA also flagged a sharp increase in refining margins, noting that the crack spread—the difference between crude and ATF—has surged to over $130 per barrel from a historical range of $11–18. This, it said, reflects “exorbitant” pricing that goes beyond underlying production costs.

International operations hit harder

The situation is further complicated by pricing disparities between domestic and international operations. While domestic ATF price increases were capped at ₹15 per litre, international operations saw a rise of ₹73 per litre, making “practically international operations… completely unviable,” the letter said.

Rupee depreciation and additional costs linked to airspace disruptions have added to the pressure, with airlines reporting mounting losses through April.

Industry seeks policy intervention

The FIA has urged the government to step in with immediate relief measures, including reinstating a pricing “crack band” to limit refinery margins, temporarily suspending the 11% excise duty on ATF, and reducing state-level VAT, which can go as high as 25–29% in key aviation hubs.

“Airlines are in a very difficult, precarious and challenging situation,” the letter mentioned, warning that without intervention, carriers may be “forced to rationalise capacity, reduce network deployment, and curtail connectivity.”