The Federation of Indian Airlines (FIA), which includes Air India, IndiGo and SpiceJet, has told the government that the country's airline industry is under extreme stress and on the verge of "stopping operations" as the West Asia war had caused oil prices to soar.
Aviation stocks declined on Tuesday, with shares of SpiceJet tanking 4.96 per cent to settle at ₹14 on the BSE. IndiGo's stocks declined 2.59 per cent to ₹4,445.10.
In a letter to the civil aviation ministry earlier this week, the FIA called for a revision in aviation turbine fuel prices and financial support from the government to cushion the twin blows of rising ATF costs and longer routes because of airspace closures.
It urged the government to step in with immediate relief measures, including fuel pricing safeguards and tax relief to help airlines sustain operations.
The aviation sector was already under severe strain stemming from additional operational costs, especially on long-haul routes, after Pakistan closed its airspace to Indian carriers. The problem has been compounded by the war in West Asia. Besides impacting fuel prices, the conflict resulted in major disruption of air routes as the war gripped most of the Gulf region.
Flagging the risk of flight cancellations, the FIA sought urgent intervention on the ATF pricing mechanism introduced earlier this month. The government limited the hike in ATF price for domestic operations to ₹15 per litre but raised it by ₹73 per litre for international flights. This, according to the federation, has practically made both international and domestic operations unviable and resulted in significant losses for the aviation sector this month.
The hike in the prices of ATF, which accounts for about 40 per cent of an airline's cost, has pushed up operational costs by around 20 per cent, the FIA said.
"Add to this, the rupee has also depreciated further to its lowest level, adding additional burden on airlines in terms of ATF pricing. Since petroleum products drive the industry cost escalation, the local suppliers have also started approaching airlines for revision of costs due to revision in the rates of polymers, petrochemicals and other ancillary products," it added.
The federation requested the government to reinstate the crack band mechanism, earlier agreed upon by oil marketing companies and the airlines, with the provision for review every six months. It is a pricing formula aimed at regulating the margins between the prices of crude oil and refined jet fuel.
Aviation expert Mark D. Martin, the CEO of Martin Consulting, said India was the only country that was cushioning jet fuel prices to shield airlines from cost shock.
He blamed airlines for their financial issues and said: “IndiGo losses are — as it is publicly known now — self-inflicted from the airline's actions in December 2025. Air India's worsened financial performance comes against the backdrop of its operational and safety shortfalls, poor aircraft, worsening market share and the Boeing 787 crash.”