India's leading airlines are appealing to state-owned oil refiners to freeze domestic jet fuel prices until the ongoing West Asia conflict subsides. This plea comes as the aviation industry faces immense pressure from escalating fuel costs and disruptions to international airspace.
Airlines Seek Government Intervention
According to a Bloomberg report, major carriers like Air India, IndiGo, and SpiceJet are backing this proposal, which is currently under review by state refiners and the government. The Ministry of Petroleum and Natural Gas is also involved in these discussions, with a decision anticipated before June 1.
Aviation turbine fuel (ATF) prices in India are typically revised monthly, linked to international benchmarks under a deregulated system. However, earlier this year, the government capped a domestic jet fuel price increase at 25% and mandated price maintenance through May.
Refiners Face Losses, Airlines Warn of Disruptions
State-owned refiners, including Indian Oil Corporation, Hindustan Petroleum Corporation, and Bharat Petroleum Corporation, are reportedly considering a potential 25% hike in domestic jet fuel prices for June. These companies are currently selling domestic aviation fuel at approximately ₹1.05 lakh per kilolitre, while incurring losses of about ₹92,000 per kilolitre on these sales.
The restrictions on price increases apply only to domestic aviation fuel. Jet fuel prices for international flights, which remain market-linked and unregulated, saw a doubling in April and a further rise to $1,511.86 per kilolitre in May.
Fuel constitutes nearly 40% of airline operating costs in India. Airlines have cautioned the government that unchecked fuel price increases could trigger flight suspensions and broader business disruptions. They are also lobbying for tax cuts or deferments and have begun trimming schedules due to weakening demand, partly driven by higher ticket prices.
Impact of Geopolitical Tensions and Currency Fluctuations
The aviation sector is also contending with a weaker rupee, which inflates dollar-denominated expenses such as aircraft lease payments and overseas airport charges. The conflict in Iran has significantly impacted international operations.
Indian airlines had increasingly relied on Iranian airspace for routes to Europe and the US after Pakistan restricted Indian carriers from its airspace earlier this year. These longer routes and increased fuel consumption have added considerably to airline expenses, with carriers passing some of these costs onto passengers through higher fares.
Last week, Air India announced a major rationalization of its international network for June to August 2026, citing "continued airspace restrictions over certain regions and record high jet fuel prices for international operations." The airline reduced or suspended flights across North America, Europe, Australia, and Asia, noting that these pressures had severely affected the "commercial viability of certain planned services."