India's airlines warn of stopping operations amid fuel costs

India's major airlines Air India, IndiGo, and SpiceJet have warned the government that the country's airline industry is under extreme stress and on the verge of "stopping operations," urging urgent intervention on Aviation Turbine Fuel (ATF) pricing and financial support. The Federation of Indian Airlines (FIA), representing the three carriers, made the appeal in a letter to the civil aviation ministry dated April 26, citing unprecedented rises in jet fuel prices driven by Middle East tensions and soaring operating costs from airspace restrictions, particularly on long-haul routes. The federation called for immediate financial support, extension of fuel pricing mechanisms across domestic and international operations, and temporary deferment of the 11 percent excise duty on ATF. The group highlighted that ATF accounts for approximately 40 percent of airline operational expenses, and while the government capped domestic ATF price increases at Rs 15 per litre last month, international operation prices rose by Rs 73 per litre, making both segments unviable. According to FIA, Delhi has the second-highest VAT on jet fuel at 25 percent while Tamil Nadu levies the highest at 29 percent, with major aviation hubs including Mumbai, Bengaluru, Hyderabad, and Kolkata imposing VAT between 16 and 20 percent. The government is reportedly weighing relief measures, with a Rs 5,000 crore emergency credit guarantee scheme likely to be cleared this week to support stressed carriers. The FIA also advocated for a transparent pricing framework under the crack band mechanism of USD 12-22 per barrel introduced in October 2022, noting it had previously provided fair margins to oil marketing companies. These six cities account for more than half of airline operations in India, compounding the sector's challenges as the prolonged US-Iran conflict continues to drive up costs and weaken travel demand.