ATF price surge pushes airlines to edge

The Federation of Indian Airlines (FIA), which represents Air India, IndiGo and SpiceJet, in a letter dated April 26, to the Ministry of Civil Aviation, has warned that the aviation sector is facing “extreme stress” due to soaring Aviation Turbine Fuel (ATF) prices. The group said the situation has practically made international operations, along with domestic operations, completely unviable and resulted in significant losses for the aviation sector in April.

“Since ATF happens to be 30 per cent to 40 per cent of airlines cost, this unprecedented increase in ATF cost has moved the airlines operation cost from 30 per cent-40 per cent to 55 per cent-60 per cent, creating completely non-operatable conditions for airlines. Add to this, the Rupee has also depreciated further to its lowest level, adding additional burden on airlines in terms of ATF pricing,” the letter read.

The FIA flagged that airlines are struggling to absorb the increase, particularly on international routes, where fuel costs are higher and pricing flexibility is limited. Airlines also warned that sustained high fuel prices are beginning to strain cash flows, adding to financial pressure across the sector.

Airlines have demanded reinstatement of crack band in line with pre agreed formula and reduction of VAT in key States and temporary deferment of excise duty on ATF. Crack band refers to a mechanism of ATF pricing that stops extreme differences between the price of crude oil and refined ATF. Also, Airlines have requested rational ATF pricing, a temporary suspension of 11 per cent excise on ATF for domestic operations.

“India’s largest aviation hub — Delhi — has the second-highest VAT in India at 25 per cent. Tamil Nadu I highest at 29 per cent. Rates at other major aviation hubs of Mumbai, Bangalore, Hyderabad, and Kolkata range between 16 per cent and 20 per cent. These six cities cover more than 50 per cent of the airline operations within India. To ensure the uninterrupted operation of airlines within India… 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 letter read.

Last month, the government limited the hike in ATF price to Rs 15 per litre for domestic operations, but for international operations, the price rose by Rs 73 per litre.

The letter signals a deepening crisis in India’s aviation sector at a time when travel demand remains strong but cost pressures are intensifying. With fuel prices, taxes and geopolitical risks converging, the industry has sought swift government action to prevent disruption in flight operations and passenger connectivity.

In India, airlines have so far absorbed part of the increase, but industry executives say there is limited room to continue doing so if costs remain elevated. For passengers, the implications are pretty straightforward. Higher fuel costs typically feed into ticket prices over time. Airlines may also reduce frequency on routes that become difficult to sustain.