Air India, IndiGo, SpiceJet warn of shutdown as fuel crisis deepens

India’s leading airlines — Air India, IndiGo and SpiceJet — have warned that soaring jet fuel prices and war-related airspace disruptions are pushing the aviation sector towards a severe financial crisis, prompting calls for urgent government intervention.

In a letter to the Ministry of Civil Aviation, the Federation of Indian Airlines (FIA), which represents the three carriers, said the industry was under “extreme stress” and warned that airlines could be forced to ground aircraft and suspend operations if relief measures were not introduced immediately.

Airlines warn of ‘unsurmountable losses’

The FIA said airlines were facing a sharp increase in operational costs due to rising aviation turbine fuel (ATF) prices and longer international flight routes caused by regional airspace restrictions linked to the ongoing West Asia conflict.

“… any ad hoc pricing (domestic vs international) and/or irrational increase in the price of ATF will result in unsurmountable losses for airlines and will lead to grounding of aircraft, resulting in cancellation of flights,” the federation said in its letter dated 26 April.

“The airline industry in India is under extreme stress and is on the verge of closing down or of stopping its operations,” it added.

Fuel costs now biggest burden

Airlines said nearly 40 per cent of their operating expenses are now linked to jet fuel procurement.

According to the FIA, the surge in crude oil prices following the Iran war, combined with rupee depreciation and route diversions due to restricted airspace, has sharply escalated costs across both domestic and international operations.

“Jet fuel prices have grown considerably and differential between crude and ATF is challenging the operation of airlines in totality,” the federation said.

International operations ‘completely unviable’

The airlines said international operations had become “completely unviable”, while domestic services were also facing mounting pressure.

The industry body warned that the imbalance between rising fuel prices and operational expenses was threatening network sustainability.

The federation also noted that the government last month capped the increase in domestic ATF prices at Rs 15 per litre, while prices for international operations rose by Rs 73 per litre.

Demand for tax relief

The FIA has sought temporary suspension of the 11 per cent excise duty on ATF, arguing that the tax burden has increased substantially due to higher fuel prices and rupee depreciation.

“With the abnormal increase in ATF prices from the pre-crisis period, adding rupee depreciation to the increased prices, the 11 per cent excise duty also increases manifold for the airlines,” the letter said.

The body also flagged high state-level VAT on jet fuel.

According to the FIA, Delhi levies 25 per cent VAT on ATF — among the highest in the country — while Tamil Nadu charges 29 per cent. Other major aviation hubs including Mumbai, Bengaluru, Hyderabad and Kolkata impose VAT ranging from 16 to 20 per cent.

Industry seeks immediate intervention

The airlines urged the government to provide “immediate and meaningful financial support” to help carriers survive the crisis.

The sector has been under growing strain since the escalation of the Iran conflict, which has disrupted major international air corridors, increased flying times and sharply raised fuel consumption.

The aviation industry globally has been hit by rising energy prices following disruptions in the Strait of Hormuz, one of the world’s most critical oil transit routes.

Indian carriers, which operate large international networks across West Asia, Europe and North America, have been particularly affected by longer rerouted flights and escalating fuel costs.