The country's major airlines have asked state-run oil refiners to hold off on raising jet fuel prices for domestic flights until the West Asia conflict eases, as soaring fuel costs and airspace disruptions pile pressure on the aviation sector, according to a Bloomberg report citing people familiar with the matter.

The proposal, backed by airlines including Air India, IndiGo, and SpiceJet, is being examined by state-owned refiners and the government, the report said.

The Ministry of Petroleum and Natural Gas is also involved in the discussions and could intervene again, the report said, adding that a decision is expected before June 1. 

Aviation turbine fuel prices in India are revised monthly by oil marketing companies and are linked to international benchmark prices under a deregulated pricing system introduced more than two decades ago.

However, after oil prices jumped earlier this year, the government capped the latest increase in domestic jet fuel prices at 25% and asked refiners to maintain prices through May.

State-owned refiners, including Indian Oil Corporation, Hindustan Petroleum Corporation, and Bharat Petroleum Corporation, are reportedly discussing whether to raise domestic jet fuel prices by as much as 25% in June.

The refiners are reportedly selling fuel for domestic flights at around ₹1.05 lakh per kilolitre while incurring losses of roughly ₹92,000 per kilolitre. The restrictions apply only to domestic aviation fuel.

Jet fuel prices for international flights, which remain market-linked and unregulated, doubled in April and rose further to $1,511.86 per kilolitre in May, the report said.

Fuel accounts for nearly 40% of airline operating costs in India.

Airlines have warned the government that soaring fuel prices could trigger flight suspensions and broader business disruptions if costs continue rising unchecked. They are also lobbying for tax cuts or deferments while trimming schedules amid weakening demand, caused partly by higher ticket prices.

The sector is simultaneously dealing with a weaker rupee, which has increased dollar-denominated costs such as aircraft lease payments and overseas airport charges.

The Iran conflict has also disrupted international operations. 

Indian airlines had increasingly relied on Iranian airspace for Europe- and US-bound routes after Pakistan barred Indian carriers from using its airspace earlier this year.

The longer routes and higher fuel burn have added to airline expenses, with carriers passing on part of the burden to passengers through higher fares.

Last week, Air India announced a major rationalisation of its international network between June and August 2026, citing "continued airspace restrictions over certain regions and record high jet fuel prices for international operations".

The Tata-owned airline suspended or reduced flights across North America, Europe, Australia, and Asia, saying the pressures had significantly affected the “commercial viability of certain planned services”.
 

Published on: May 19, 2026 1:39 PM IST