IT’S BEEN A turbulent year for India’s airlines. After a tumultuous 2025 — following the Air India crash and the IndiGo disruptions — it was expected that the new year would finally offer a breather for India’s airlines. Instead, the first four months of 2026 have proved otherwise, with the Indian airlines having had to significantly cut international operations due to the war in West Asia, alongside bearing the brunt of rising fuel prices.

Now, on April 27, the Federation of Indian Airlines (FIA), an industry body representing Air India, IndiGo, and SpiceJet, which together account for more than 90% of the domestic market, has written to the Centre seeking urgent intervention. “The airline industry in India is under extreme stress and is on the verge of closing down or of stopping its operations,” reads the letter addressed to the civil aviation secretary. “The dire condition of the aviation sector has been exacerbated by the West Asia war and the exorbitant increase in the price of ATF (aviation turbine fuel).” Fuel prices account for about 40% of operational costs for airlines. The rising prices, hence, have created a severe imbalance between domestic and international operations, rendering airline networks unviable and unsustainable.

In April 2025, oil companies had hiked ATF prices by more than 115%, with the rates doubling to a record ₹2.07 lakh per kilolitre. Soon after, the government capped the price hike at ₹15 per litre to ensure partial pass-through and avoid a steep rise. “However, the ATF pricing for international operations was increased by ₹73 per litre, making practically international operations along with domestic operations completely unviable and resulting in significant losses for the aviation sector in April 2026,” the FIA says. The steep rise has pushed the overall cost of operations from 30-40% a year ago to as much as 55-60% now, it adds. “The rupee has also depreciated further to its lowest level, adding additional burden.” FY26 saw the rupee decline by 11%, its steepest fall since 2011-12.

Government support will be needed as India’s ATF supply has multiple tax layers, including excise plus state VAT, explains Alok Anand, chairman of Acumen Aviation, an aircraft asset management and leasing company. “Whereas many competing markets either have state-owned airlines, lower aviation fuel tax exposure, or faster central fiscal tools,” he adds.

Already, India’s air passenger traffic was expected to grow only a tad, between 0% and 3%, during 2025-26, with net losses for the aviation industry pegged at ₹17,000-18,000 crore during FY27. Air India, India’s second-largest airline, is staring at a reported loss of ₹22,000 crore for the last fiscal.

“Overall, I feel that while IndiGo and Air India might scrape through (not so much SpiceJet), it puts their growth plans back by many years,” Anand says. “Basically, it once again brings into contrast the deep structural fixes needed: harmonisation of ATF prices, access to Pakistan airspace, and building a real hub competitiveness to match the Middle East and other regions. The way out requires immediate help from the government, but also long-term structural reforms.”

Further worsening the situation for the airlines are the airspace closures, thereby increasing the number of halts and fuel consumption. “The flight times have become longer by more than three hours since last year due to Pakistan’s airspace closure. Now, even longer due to Middle East airspace restrictions, meaning more fuel needed, plus crew constraints,” Anand says. All the factors combined have a direct impact on fuel purchases, lease rentals, as well as other associated maintenance and operational costs, he adds.