Oil Crisis Jolts Aviation Sector; Flight Cancellations Mount as Airlines Seek Relief

Indian airlines warn of flight cancellations as ATF prices surge sharply due to rising crude oil costs. FIA has urged the government for tax relief and policy support to prevent heavy losses and stabilize the aviation sector.

Post Published By: Karan Sharma

Updated : 28 April 2026, 7:04 PM IST

Airlines Warn of Flight Cuts Amid Fuel Price Surge

New Delhi: The Federation of Indian Airlines has issued a warning to the Ministry of Civil Aviation through an urgent letter. Air India, IndiGo, and SpiceJet have stated that if immediate relief is not provided, they may be forced to cancel flights.

Massive Surge in ATF Prices

• Aviation Turbine Fuel (ATF) prices have witnessed a massive hike.
• Brent crude surged from $72 to $118 per barrel,
• While ATF skyrocketed from $87 to over $260—marking an increase of approximately 295%.
• Currently, ATF is trading at around $235 per barrel.

International Flights Operating at a Loss

The "crack spread"—the price differential between crude oil and ATF—has also reached a record high. Previously, this spread ranged between $11 and $18; it has now surged to $132 per barrel. Airlines state that, as a result, international flight operations have become entirely unprofitable.

Pressure from Rising Costs

Typically, ATF accounts for 30–40% of an airline's total operating costs; however, this figure has now ballooned to 55–60%. Furthermore, the depreciation of the Rupee is inflicting a double blow upon the airlines.

Three Major Demands from the Government

The FIA ​​has put forth three key demands to the government:

1. Restore the "Crack Band Mechanism
   To regulate the price differential between crude oil and ATF.
2. Abolish Excise Duty
   A demand to temporarily waive the 11% excise duty currently levied on domestic flights.
3. Reduce VAT
   Reduce the Value Added Tax (VAT) applicable to ATF in Delhi, Tamil Nadu, and other major cities.

Greater Impact in Major Cities

• VAT on ATF stands at 25% in Delhi,
• 29% in Tamil Nadu,
• and between 16% and 20% in Mumbai, Bengaluru, Hyderabad, and Kolkata.

These cities collectively account for over 50% of the country's total airline operations. Rising oil prices have plunged the aviation sector into a severe crisis. If immediate relief is not provided, passengers may face higher ticket prices and fewer flights.