FIA Sends SOS To Govt Over ATF Price Hike; Air India, IndiGo and SpiceJet Warns of 'Shutdown', Says Report

Indian airlines have warned that operations could shrink sharply, with possible shutdowns and widespread flight cancellations, as soaring Aviation Turbine Fuel costs threaten viability. The Federation of Indian Airlines has asked the Union government for urgent intervention on ATF prices to prevent disruption across domestic and international airline networks.

In a letter dated April 26 to the Ministry of Civil Aviation, the Federation of Indian Airlines, which represents Air India, IndiGo and SpiceJet, stated that "urgent support is required for ATF pricing to continue airline operations," reported CNBC TV 18. The group said ongoing volatility in ATF prices had pushed operating conditions close to collapse.

ATF prices and airlines seek immediate tax relief

As a short-term measure, the Federation of Indian Airlines requested several tax changes on ATF prices. The body asked the Centre to temporarily remove the 11% excise duty on ATF for domestic flights, restore the earlier "crack band" pricing formula, and push for lower value-added tax in major aviation hubs.

The federation argued that the current tax structure is magnifying financial strain because excise duty is linked to ATF prices. When fuel prices jump, tax outgo rises in tandem, leaving airlines with little room to manage fares. The industry said this interaction between taxes and ATF prices has deepened the crisis.

ATF prices and industry under 'extreme stress'

Highlighting overall stress, the industry body said "the airline industry in India is under extreme stress and are on the verge of closing down or of stopping its operations." According to the group, unpredictable ATF prices have damaged route planning and cash flows, affecting both domestic and international services operated by Indian carriers.

The Federation of Indian Airlines criticised what it described as ad-hoc pricing of ATF, saying "ATF adhoc pricing is creating severe imbalance in domestic and international operations and rendering airline networks unviable and unsustainable." The federation said this imbalance is forcing airlines to re-examine route economics and reconsider the viability of several segments.

ATF prices and impact on international routes, costs

Pressure is most visible on overseas routes, where the federation reported an increase of ₹73-75 per litre in ATF prices for international operations. The body said this jump has made some long-haul and regional routes "completely unviable," causing heavy losses as Indian airlines compete with foreign rivals based at lower-fuel-cost hubs.

The surge in ATF has reshaped airline cost structures. The federation said the "unprecedented increase in ATF cost has moved the airline operation cost from 30-40% to 55-60%," describing the situation as "non-operatable conditions." With fuel now forming more than half of operating expenses, airlines say they have limited options other than trimming capacity or raising fares.

Refining margins have also become a concern. The federation pointed to high crack spreads, which are keeping ATF prices high even though global crude oil benchmarks have eased. According to the industry, refinery margins have risen faster than underlying costs, which means airlines are not gaining from softer crude prices in international markets.

The group warned that unchecked price swings could cause serious service disruption. It said, "Any adhoc pricing... or irrational increase in the price of ATF will result in unsurmountable losses for airline and will lead to grounding of aircraft resulting in cancellation of flights," reported CNBC TV 18. Airlines said such grounding would reduce connectivity, cut frequencies and likely raise ticket prices.