Airlines in India have warned that the sector is edging towards a critical operational crisis, as rising aviation turbine fuel (ATF) costs, driven by the Middle East conflict, threaten to destabilize operations and force flight cancellations.
The Federation of Indian Airlines (FIA), representing Air India, IndiGo and SpiceJet, has urged the government to urgently revise fuel pricing, warning that unchecked increases could result in “insurmountable losses” and grounding of aircraft.
The industry body said fuel now accounts for nearly 40% of total airline operating costs, making carriers highly vulnerable to global oil price volatility, according to international media.
In a formal appeal, airlines called for immediate financial relief and a return to a uniform pricing system for domestic and international routes, including reinstating the “crack band” mechanism to limit extreme fuel price fluctuations.
They also requested a temporary suspension of the 11% excise duty on ATF, arguing that rising fuel costs combined with currency depreciation are severely increasing the tax burden on the sector.
India currently caps domestic ATF price increases at ₹15 per liter, while international fuel costs have surged by up to ₹73 per liter, creating a significant imbalance that is hitting long-haul international operations the hardest.
Meanwhile, similar pressures are being felt across Europe, where smaller regional airports face what industry bodies describe as an “existential threat” if fuel-driven cancellations increase.
The Airports Council International Europe warned that many regional airports, still recovering from the pandemic and operating 30% below pre-2019 levels, are especially exposed to demand shocks and rising operating costs.
It cautioned that higher jet fuel prices, combined with cost-of-living pressures and EU border control changes, could accelerate route cuts and reduce air connectivity across smaller cities.
Globally, the International Air Transport Association (IATA) said demand for air travel remains stable for now, but warned that any fuel shortage could first impact Asia before spreading to Europe, potentially forcing rationing and cancellations.
Airline groups are also lobbying for regulatory relief measures, including flexibility on airport slot rules to allow easier flight cancellations without penalty.
In the United States, American Airlines has cut its 2026 profit forecast, warning that soaring jet fuel costs linked to the Iran conflict are severely squeezing margins.
The carrier estimates fuel expenses will rise by more than $4 billion this year, with prices averaging around $4 per gallon, nearly doubling since the conflict began.
Despite posting a smaller-than-expected loss in the first quarter and stronger-than-expected second-quarter outlook, the airline warned that cost pressures remain severe across the industry.
To offset rising expenses, US carriers have increased fares, cut capacity, and raised fees for services such as baggage, though analysts say these measures cannot fully absorb the fuel shock.
American Airlines also revised its full-year earnings outlook sharply downward, while noting partial recovery of fuel costs and stronger domestic demand supporting revenue growth.
