India's major airlines, IndiGo and Air India, are appealing to the government for urgent relief measures including tax reductions and limits on airport fees. This appeal arises from recent sharp increases in operational costs driven by geopolitical tensions and airspace restrictions in the region.
Since April 2025, after Pakistani airspace was closed to Indian aircraft, carriers have had to navigate longer routes through Europe and North America, leading to higher fuel consumption and increased financial strain. The situation is compounded by the conflict in Iran, which further disrupts planned flight paths.
Taxation and Regulatory Challenges
The airlines criticize the high taxes on aviation fuel, with India imposing a federal tax of 11 percent on kerosene, additional state taxes of up to 29 percent, and a 18 percent tax on premium economy tickets, which they seek to reduce. They also call for stricter regulation of fees at privatized airports, which are reportedly charging higher rates than those at government-operated facilities, squeezing airline margins.
"The operational impact of these developments is severe. Our data indicates that between late February and early March 2026, around 64 percent of planned flights to the west were canceled,"
said Air India. According to the airline, annual losses due to the Pakistani airspace closure are estimated at approximately US$600 million, adding to last year's reported loss of over US$433 million. This financial strain threatens to hinder future expansion projects and threatens the sector's stability.
Experts emphasize that aligning India’s aviation regulations with international standards is crucial to maintaining global competitiveness. Without intervention, rising ticket prices could dampen passenger demand, impacting economic growth. The ongoing instability in West Asia and strained regional relations continue to challenge the sector’s recovery prospects.
