Travelers planning domestic air journeys in India this summer face significantly higher fares, as major carriers Air India and IndiGo announce substantial cuts to their flight schedules. The reductions, primarily driven by soaring jet fuel prices and a strengthening US dollar, will take effect from June 1 to August 31, impacting key metro sectors like Delhi, Mumbai, Hyderabad, Chennai, and Bengaluru.
Capacity Reductions Drive Up Prices
Air India is reportedly set to reduce its domestic capacity by 15%, while IndiGo plans a 5-7% cut. This decrease in available seats directly translates to increased demand and, consequently, higher ticket prices. Domestic airfares have already seen an average increase of 15%, with international routes experiencing a hike of 35-40%.
The current capacity adjustments follow earlier reductions in international operations by both airlines. Air India previously cut international flights by 25%, affecting 33 routes, while IndiGo reduced its global schedule by 12%. These moves are a direct response to the skyrocketing Aviation Turbine Fuel (ATF) prices, which have surged since the Middle East conflict began in late February.
Multiple Headwinds for Indian Airlines
Beyond fuel costs, several factors are contributing to the challenging operational environment for Indian carriers:
- Rising US Dollar: The appreciating US dollar against the Indian rupee increases operational expenses, particularly for leased aircraft and maintenance.
- Airspace Closures: Continued airspace restrictions over West Asia and Pakistan force Indian flights to take longer, more fuel-intensive routes for westward travel.
- Government Appeal: Prime Minister Narendra Modi's appeal to citizens to reduce international travel may also influence domestic travel patterns, indirectly affecting airline strategies.
Smaller carriers are also grappling with severe challenges. SpiceJet, for instance, is reportedly facing its toughest period with unpaid staff dues and a reduced fleet size due to expiring aircraft leases, leading to numerous flight cancellations.
Financial Outlook Remains Challenging
Analysts project continued financial strain for the aviation sector. Kinjal Shah, Senior Vice President & Co-Group Head, Corporate Ratings at ICRA Ltd., anticipates that losses will persist, albeit narrowing, in the coming fiscal years due to the adverse cost environment shaped by geopolitical developments. ICRA had previously projected net losses to narrow to ₹11,000-12,000 crore in FY27 from ₹17,000-18,000 crore in FY26, supported by growth in passenger traffic.
Air India's losses more than doubled in FY26, reaching ₹26,000 crore, significantly higher than the consolidated loss of ₹10,859 crore reported in FY25, according to Singapore Airlines, a key stakeholder in the airline.