Regional Airlines Hit by Rising Jet Fuel Prices, Seek Government Assistance

Airlines in India have been forced to reconsider their operations due to the rising prices of Aviation Turbine Fuel (ATF). In this situation, regional airlines have requested the Ministry of Civil Aviation to restart the previously cancelled Price Stabilisation Fund (PSF) with more favourable terms. According to a report by India Today, operating additional flights has now become economically unviable due to high fuel costs, even as some operators increase their fleet capacity.

A senior regional airline official stated, "Although the fleet capacity of some airline operators is increasing, their operations are decreasing due to high fuel costs." Illustrating this, Star Air, one of India's largest regional airline operators, has reduced its operations. Due to high jet fuel costs, the airline has reduced its flights from 68 in the summer schedule to 52 in the winter schedule.

According to industry insiders, operating more flights has now become akin to burning cash, forcing both regional and large airlines to modify their operations. Geopolitical tensions in the Middle East have also played a significant role in increasing this pressure, leading to a rise in ATF prices and disruptions in operations due to airspace restrictions. Air India and IndiGo were already facing the impact of restrictions on Pakistani airspace. During the 'Aviation India' event held in Delhi, Air India CEO Campbell Wilson (Tewelde Gebremariam) also pointed out that international competitors do not face such airspace-related challenges.

The figures regarding the increase in ATF prices are alarming. In March, fuel prices were approximately ₹105 per litre, which rose to nearly ₹207 per litre in April. When the government's assistance scheme was introduced, prices were around ₹115 per litre, and by October, they reached approximately ₹137 per litre. According to a video report by India Today, due to this increase in jet fuel costs, the share of fuel in total operating costs has risen from 40 per cent to nearly 60 per cent.

To resolve this issue, the Union Cabinet in June 2026 approved a one-time budgetary support of up to ₹10,000 crore for Oil Marketing Companies (OMCs). The aim of this scheme was to protect Indian airlines operating domestic and international flights against sharp fluctuations in global prices. However, the scheme was shut down after just one month as it was not accepted by any airline.

According to airline executives, the conditions attached to the previous proposal deterred them from participating in the scheme. A senior airline executive told India Today, "The previous PSF proposal had some conditions that made airlines uncomfortable, including a condition on which OMC we could procure fuel from. Furthermore, it demanded that we enter into an immediate MoU and terminate our old commitments. We never imagined that ATF prices would reach current levels." He further added that if the government brings revised clauses in the PSF proposal, airlines might show interest this time.

Regional airlines are specifically demanding that the government consider their contribution to connectivity while reconsidering the scheme. A representative of a regional carrier stated that four to five regional operators together account for only 3 per cent of the country's total ATF consumption, but they provide service on 30-35 per cent of unique routes. The representative further stated, "The government could consider providing favourable or special arrangements for regional players under the PSF. We hope so," as these airlines continue to operate on routes where other large airlines are not willing to operate.

Thus, regional airlines, burdened by rising fuel prices and operating costs, are now expecting relief from the government to ensure that air connectivity to the remote areas of the country is maintained.