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Airline sector under severe strain as ATF prices surge; FIA seeks urgent government intervention
In a letter written to the Ministry of Civil Aviation (MoCA), FIA highlighted that airlines are facing a 'precarious situation' driven by a combination of surging crude oil prices, widened refinery margins (crack spreads), currency depreciation, and increased operational costs linked to regional geopolitical tensions, including the West Asia conflict.
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According to FIA, ATF prices have witnessed an unprecedented surge |Image source: DNA-Pune|
Written By: ZeeBiz WebTeam
Updated: Tue, Apr 28, 2026
06:44 PM IST
06:44 PM IST
New Delhi, ZeeBiz WebDesk
The Federation of Indian Airlines (FIA), representing major carriers including Air India, IndiGo, and SpiceJet, has warned that India’s aviation sector is under extreme financial stress due to a sharp rise in Aviation Turbine Fuel (ATF) prices and geopolitical disruptions. The industry body has urged immediate government intervention, stating that current conditions are making both domestic and international airline operations 'unviable and unsustainable.'
In a letter written to the Ministry of Civil Aviation (MoCA), FIA highlighted that airlines are facing a 'precarious situation' driven by a combination of surging crude oil prices, widened refinery margins (crack spreads), currency depreciation, and increased operational costs linked to regional geopolitical tensions, including the West Asia conflict.
"While the Government of India stepped in last month to prevent the collapse of the Aviation Sector by limiting the increase of ATF to Rs 15 per litre for domestic operations. However, the ATF pricing for international operations was increased by Rs 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 April’26 pricing outcomes do not ensure parity between domestic and international operations," FIA said.
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As per FIA, the price of ATF has experienced a historic increase, with benchmark prices going up substantially and causing a huge hike in expenses for airlines. It was highlighted by FIA that fuel expense forms 30 per cent to 40 per cent of airline expense under normal circumstances, which has now gone up to almost 55 per cent to 60 per cent.
The federation also pointed out that while the government had earlier capped domestic ATF price increases, international aviation fuel rates have risen steeply, creating a 'parity imbalance' that has worsened losses for Indian airlines.
Crack band mechanism reinstatement demanded
A key demand from FIA is the reinstatement of the 'crack band' pricing mechanism, which was previously agreed upon between airlines and Oil Marketing Companies (OMCs) under government supervision. The mechanism was designed to regulate refinery margins and ensure stable fuel pricing.
According to FIA, the existing gap between the crude oil price and ATF has widened substantially, rendering the activities unfeasible from an economic perspective. FIA further alleged the OMCs of earning substantial profits without any reasonable explanation for their expenses.
FIA has suggested that the previously used formula-based price policy should be reintroduced on a periodic basis every six months.
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Tax relief and VAT reduction sought
FIA has also called for the temporary suspension of the 11 per cent excise duty on ATF for domestic operations, stating that its percentage-based structure worsens the impact of rising fuel prices.
Additionally, it has urged state governments to reduce VAT on aviation fuel, highlighting that major aviation hubs such as Delhi (25 per cent) and Tamil Nadu (29 per cent) impose some of the highest tax rates in the country, significantly increasing operational costs.
Warning of operational disruptions
However, the federation warned that under the existing pricing policy, airlines will have no choice but to downsize their capacity, cut back on network services, or cease operations altogether. Such outcomes, it said, would severely impact connectivity, passengers, and the broader aviation ecosystem.
It stated that the industry is already struggling to cope with losses resulting from restricted airspace, political uncertainties, and financial stress caused by currency problems, and the new rise in oil prices might exacerbate this situation.
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Appeal for immediate action
FIA also called for immediate action by the government, emphasising that any damage to the Indian aviation industry could be averted only through concerted fiscal and policy interventions.
While the company restated its resolve to maintain a clear and systematic pricing system for airline tickets, it stressed that the company needed immediate help in order to survive in these 'extraordinary global circumstances.'
"Considering the extraordinary global circumstances and the fragile financial condition of the aviation sector, keeping in mind already burdened with additional cost due to neighbouring country(s) airspace closure, rupee depreciation, FIA requests Government to kindly consider temporarily suspending the excise duty on ATF for domestic operations," it said.
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