India’s largest airline, IndiGo, has urged the government to reduce fuel taxes and, along with rival Air India, is pressing New Delhi to persuade privately operated airports to lower certain charges, according to three sources cited by Reuters. The appeal comes as escalating tensions in the Middle East continue to strain airline finances.
Both IndiGo and Air India are dealing with a dual challenge. The ongoing conflict involving Iran has made it difficult for airlines to use key Middle Eastern airspace, while Indian carriers also remain barred from flying over Pakistan due to diplomatic tensions with India.
As a result, airlines are being forced to operate longer routes on international flights, increasing operational costs. IndiGo, for instance, has been flying to the United Kingdom via Africa, while Air India has had to introduce additional stops on some routes to North America.
According to the sources, the airlines are lobbying the Indian government for financial relief, particularly through reductions in aviation-related taxes and fees.
IndiGo is specifically seeking a cut in taxes on aviation turbine fuel (ATF), which accounts for roughly 30–40% of an airline’s operating expenses. ATF currently attracts a federal tax of 11%, in addition to state-level levies that can reach up to 29%, two of the sources said.
IndiGo, Air India and India’s civil aviation ministry did not respond to requests for comment.
IndiGo held a domestic market share of 63.6% in January, while the Air India Group accounted for 26.5%.
Growing Financial Pressure
The two airlines have also requested the rationalisation of charges at privately operated airports. According to the sources, the carriers argue that certain passenger-related fees at private airports are higher than those at government-run airports and should be reduced.
Data from aviation analytics firm Cirium shows that from February 28 — when the United States and Israel launched military operations against Iran — to March 9, India’s two largest international carriers did not operate 64% of their 1,230 scheduled flights to the Middle East, Europe and North America.
Last week, HSBC warned that the situation in the Middle East could place a “significant burden” on the costs and profitability of Indian airlines.
Air India has also reportedly asked the government to reduce local taxes on premium economy tickets to 5%, down from the current 18%, according to one of the sources.
The airline, jointly owned by Tata Group and Singapore Airlines, has previously estimated that the Pakistan airspace ban imposed in April 2025 could cost it around $600 million annually. Air India, which was privatised in 2022 after being sold by the Indian government, reported a loss of $433 million last year.
