Geopolitical tensions in West Asia threaten higher airfares in India

India’s aviation sector is bracing for a fresh wave of cost pressures that could ultimately translate into higher ticket prices for passengers. Geopolitical tensions in West Asia, particularly the fallout from the Iran-Israel conflict, have already begun pushing up global crude oil prices, directly affecting the cost of Aviation Turbine Fuel (ATF). The government has confirmed that ATF prices are revised on the first day of every month, raising the strong possibility of an increase effective April 1. Union Civil Aviation Minister Ram Mohan Naidu acknowledged the financial strain on airlines but emphasized that the priority remains safe and uninterrupted operations without immediately burdening passengers.

Despite assurances that efforts are underway to shield travellers from an immediate spike, the removal of domestic fare caps has fundamentally altered the pricing landscape. Until recently, fares on most routes were broadly capped between Rs 7,500 and Rs 15,000, with some touching Rs18,000. That ceiling has now been scrapped, paving the way for fully dynamic pricing driven by demand and costs. Officials insist passenger interests remain a key focus, yet airlines now enjoy complete freedom to pass on rising operational expenses directly to flyers.

In response to mounting fuel costs, domestic carriers have already introduced fuel surcharge charges. Air India and Air India Express have added Rs 399 on domestic tickets, while international routes carry additional levies ranging from $10 to $200. Indigo has implemented surcharges between Rs 425 and Rs 2,300 depending on distance, and Akasa Air has followed suit with charges from Rs 199 to Rs 1,300 based on flight duration. International fares, already elevated since the conflict began, have climbed further as operating capacity to and from West Asia has shrunk dramatically, with major Gulf carriers drastically reducing flights.

A policy and communications consultant noted that neither Netanyahu nor Trump appeared to have fully anticipated the fallout, particularly for the aviation industry. He highlighted Iran’s strategy of targeting oil facilities in the UAE as an effective way to draw international attention, while pointing out the strategic vulnerability of the Strait of Hormuz. However, he expressed cautious optimism that aviation companies have access to multiple fuel supply sources beyond the Gulf region, suggesting the impact on ticket prices might be less severe than initially feared if the government permits necessary fare adjustments for airline survival.

An aviation expert was unequivocal about the severity of the situation. She pointed out that ATF already accounts for nearly 45 per cent of an airline’s operating costs in India, a burden exacerbated by crude oil crossing $147 per barrel. She criticized the absence of tax rationalization in the recent budget, noting that neither VAT relief nor inclusion under GST materialized despite long-standing demands from the industry.

She argued that the timing of the fare-cap removal—coming just a day after announcements on seat pricing—would drive fares on high-traffic routes such as Delhi-Mumbai, Delhi-Bengaluru, and Mumbai-Bengaluru “through the roof”. She contrasted Indian carriers with international players like Cathay Pacific, Lufthansa, and Air France, which benefit from fuel-hedging strategies, while domestic airlines shoulder the additional weight of VAT and now war-risk surcharges affecting both passenger and cargo operations.

Turning to passenger concerns, an executive of a fuel manufacturing company observed that frustration stems largely from limited choices. With Akasa Air still a fledgling player, the market is dominated by just two major carriers in a country that once aspired to make flying accessible to the common man. He argued that high ATF taxation—treating aviation simultaneously as a luxury and a necessity—combined with elevated airport charges has left airlines unable to improve efficiency enough to absorb costs. He suggested that transparent fare breakdowns might help passengers understand the pressures airlines face, though he noted that price cuts rarely follow quickly when ATF prices drop.

It was largely agreed upon that Indian carriers are disproportionately affected compared with global peers due to the absence of hedging mechanisms and unresolved tax issues.  The discussion underscored a Catch-22 situation: while removing fare caps offers airlines temporary relief, the lack of monitoring or rationalization risks unchecked price surges.