Represented by the Federation of Indian Airlines (FIA) which includes carriers such as IndiGo, Air India and SpiceJet the industry wrote to the government on March 12 asking for an end to price controls first introduced in December 2025 following widespread cancellations.

Airlines facing rising costs amid crisis

The airfare caps, which set maximum one‑way fares at up to ₹18,000 ($192) depending on distance, were originally aimed at protecting travelers after operational disruptions. But the FIA said the limits are now constraining carriers’ ability to respond to surging operational costs triggered by the geopolitical crisis in West Asia.

The ongoing conflict around Iran has disrupted key air routes and led to sharp increases in jet fuel costs, as airlines must avoid restricted or hazardous airspace and reroute flights over longer distances. Combined with continued bans on using neighbouring Pakistani airspace, these conditions are placing further strain on profits.

In its letter, the FIA warned that the combination of fare caps and elevated fuel bills may render some operators financially unsustainable unless the government intervenes.

Operational hurdles and longer flights

India’s aviation sector has been under pressure since regional tensions intensified, with airlines forced to reroute flights to Europe, North America and the Middle East to avoid conflict‑affected zones. These detours have lengthened journey times and pushed fuel consumption higher a significant cost at a time when global oil markets remain volatile.

To mitigate some of this impact, carriers including Akasa Air, IndiGo and Air India have already introduced fuel surcharges on both domestic and international tickets in recent weeks, passing a portion of the increased expense on to travelers.

The Directorate General of Civil Aviation (DGCA) has also temporarily eased certain operational rules, such as pilot duty limits for long‑haul flights, to help sustain service levels despite longer routing and restricted airspace.

Financial risk and government response

Industry officials say the combined effect of increased operating costs and capped ticket prices could force some carriers to withdraw from certain routes or delay planned network and fleet expansions.

So far, neither the airlines nor the government has publicly commented on the request. Analysts indicate the situation puts New Delhi in a difficult position: removing fare caps could ease financial pressure on airlines but risks higher ticket prices for passengers already feeling the pinch of surcharges.

Broader industry implications

The challenges facing Indian carriers echo global industry concerns over the impact of Middle East tensions on aviation. Airline leaders in Europe have warned that prolonged conflict and rising fuel costs will lead to higher fares worldwide and could force structural changes across the sector.

As the Iran crisis shows no immediate signs of abating, India’s airlines already coping with the lingering effects of previous operational disruptions and high fuel prices are pushing for regulatory relief to help weather what could be a prolonged period of elevated costs and complex flight planning.

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Industry executives say the spike in fuel prices triggered largely by escalating geopolitical tensions in the Middle East has significantly increased operating expenses, forcing carriers to consider fare hikes and additional surcharges to offset the rising costs.

Jet fuel prices surge amid geopolitical tensions

Jet fuel prices have risen dramatically in recent weeks following the escalation of conflict involving Iran, which has disrupted global oil markets and created fears of supply shortages. Prices that previously hovered around $85–$90 per barrel have surged to roughly $150–$200, according to airline industry data.

Fuel is typically the second-largest expense for airlines after labour, accounting for roughly 20–25% of operating costs, meaning sudden increases can quickly erode profitability.

Executives warn that airlines cannot absorb such increases indefinitely and will ultimately have to pass some of the costs on to consumers through higher fares or fuel surcharges.

Airlines begin raising fares

Several carriers have already taken steps to increase ticket prices.

Air New Zealand said it had implemented “initial fare adjustments,” raising one-way economy tickets by around NZ$10 on domestic routes, NZ$20 on short-haul flights and up to NZ$90 on long-haul routes, while suspending its financial outlook for 2026 due to the uncertainty surrounding fuel markets.

Meanwhile, Qantas Airways confirmed it would raise prices on several international routes, citing rising fuel expenses linked to the Middle East conflict.

Other airlines across Asia and Europe are also reviewing pricing strategies and operational schedules as fuel costs continue climbing.

Route disruptions and longer flights

Beyond higher fuel costs, airlines are also grappling with airspace closures and rerouted flights, particularly across parts of the Middle East.

To avoid potential conflict zones, airlines have been forced to divert flights along longer routes between Asia, Europe and Oceania increasing fuel consumption and operational complexity.

These detours are tightening capacity on key routes and pushing airfare prices higher, especially on long-haul international travel.

Airline profits and stock prices under pressure

The spike in oil prices has also rattled financial markets, with airline stocks falling sharply amid concerns that rising fuel costs could reduce profitability and dampen travel demand.

Shares of several major U.S. carriers including American Airlines, United Airlines, Delta Air Lines and Southwest Airlines have declined as investors assess the potential impact of higher operating expenses on the industry.

Analysts estimate that the largest U.S. airlines could face billions of dollars in additional annual fuel costs if prices remain elevated throughout the year.

Balancing fares and passenger demand

Airlines now face a delicate balancing act: raising ticket prices enough to offset higher costs without discouraging travelers.

Industry analysts say carriers will likely introduce gradual fare increases or fuel surcharges, rather than immediate large price hikes, to avoid weakening demand.

“Airlines will try to recover the extra costs carefully,” said one aviation analyst, noting that even small increases per ticket can help offset large increases in fuel expenses across thousands of daily flights.

Travel outlook remains uncertain

Despite the rising costs, global travel demand has remained relatively strong so far, with some international routes still reporting high occupancy levels.

However, aviation experts warn that if fuel prices continue climbing or geopolitical tensions worsen, the airline industry could face reduced passenger demand, more cancellations and slower growth in global tourism.

For now, travelers planning flights later this year may want to book early, as airlines continue to adjust fares in response to one of the most volatile fuel markets the industry has seen in years.

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