IndiGo, Air India cut domestic flights as fuel costs surge on West Asia conflict: Report

IndiGo and Air India are scaling back domestic flight operations from June through August as surging jet fuel prices linked to the US-Iran conflict and weakening seasonal demand squeeze profitability, reported The New Indian Express, citing people familiar with the matter.

Air India plans to reduce domestic operations by as much as 15%, while IndiGo will cut 5% to 7% of services, according to the report.

The two airlines together account for more than 90% of India’s domestic aviation market.

"In continuation of our previously announced adjustments to select international services between June and August 2026, we have temporarily rationalised operations on certain domestic routes during the same period, with a reduction in frequencies on select routes," Air India said in a statement on Wednesday.

The reductions come as airlines grapple with a sharp increase in aviation turbine fuel (ATF) prices, which account for nearly 40% of operating costs, and softer travel demand following the end of the school holiday season.

“We operate an average of 3,800 flights per week. The ATF cost for our domestic flights used to be ₹80,000 per kilolitre. It has now risen to more than ₹1 lakh, depending on the city, as VAT imposed by state governments varies,” TNIE quoted a senior Air India official as saying.

“It would not be financially viable to operate when ATF prices are this high.”

The airline will not suspend any route entirely but will reduce frequencies on multiple sectors, particularly from its major hubs in Delhi and Mumbai.

The reductions will take effect from June 1 through the end of August.

IndiGo, which operates about 1,950 flights daily, is also scaling down services in anticipation of weaker occupancy levels after the vacation season, the report said.

The airlines are also facing weaker feeder traffic as international operations are reduced amid geopolitical tensions and airspace restrictions.

Earlier this month, Air India announced suspension and reduction of several international services through August, impacting routes to North America, Europe, Australia and Asia.

The airline has suspended Delhi-Chicago and Delhi-Shanghai flights temporarily and reduced frequencies on routes including San Francisco, Toronto, Vancouver, Paris, Melbourne, Sydney, Singapore and Bangkok.

Air India recently discussed additional cost-cutting measures, including possible furloughs and deferred bonuses, during a board meeting chaired by Tata Sons Chairman N Chandrasekaran, according to a PTI report.

In an attempt to provide relief to airlines, some states have reduced VAT on ATF. Delhi recently lowered VAT on ATF from 25% to 7% for six months, while Maharashtra cut the levy from 18% to 7% till November 14.