Airlines seek fuel, tax relief as West Asia conflict raises operating costs

The Federation of Indian Airlines (FIA) has sought a series of measures from the government to ease the financial pressure on domestic airlines amid the continuing West Asia conflict, higher aviation fuel prices, airspace restrictions and rupee depreciation.

The FIA represents Air India, IndiGo and SpiceJet, the three major carriers in India.

In a September 25 letter to civil aviation minister Ram Mohan Naidu, the FIA sought a cost-plus pricing model for aviation turbine fuel (ATF), a shift from the current percentage-based excise duty to a fixed- rate levy, lower VAT on ATF in more states and an extension of the 25% reduction in landing and parking charges for domestic flights.

"Airlines duly recognise the support and effort put in by MOCA with respect to the reduction of landing and parking charges by 25% for domestic flights for three months. The said order was issued for 3 months and had expired in the month of July 7, 2026. With the West Asia conflict continuing, airlines are facing significant additional costs arising from airspace restrictions, longer flight routings, additional crew costs, operational disruptions, rupee depreciation and elevated fuel prices," the letter read.

"FIA requests MOCA to extend the 25% pricing reduction till such time the West Asia crisis settles down and airline operations are reverted to near normalcy,” it added.

The airlines’ body said the fuel component, which historically accounted for around 30-40% of airline operating costs, has risen to around 55-60% under the prevailing circumstances. It also pointed out that airspace restrictions have resulted in longer flight routes, higher fuel consumption, increased crew costs and lower aircraft utilisation.

FIA asks the government to review ATF pricing formula

Amid the West Asia crisis, the federation said Brent crude had risen from $72 per barrel to $118 per barrel, while the ATF price it cited had touched $260.24 per barrel before falling to around $175.33. FIA also pointed to a sharp increase in the fuel crack differential between Brent and the relevant ATF benchmark.

The body has therefore asked the government to review the ATF pricing formula and shift from international benchmark pricing to a cost-plus model. It said this should be done without affecting competition among oil marketing companies or airlines' commercial arrangements with fuel suppliers.

The industry body has also sought continuation of the 7% VAT rate on ATF in Delhi and Maharashtra, where the current relief is valid until mid-November this year.

It has requested the government to take up similar reductions with Tamil Nadu, West Bengal, Karnataka and Telangana.

“Such measures would provide much-needed support to the aviation sector, help preserve affordable air travel for passengers, and enable airlines to continue contributing to India's economic growth and connectivity objectives despite the challenging operating environment. If timely relief is not available, the airlines may be compelled to withdraw from several unsustainable routes,” the letter concluded.