IndiGo, India’s largest airline, is urging the government for a reduction in fuel taxes as it, along with Air India, faces mounting financial pressures intensified by the ongoing conflict in the Middle East. The crisis is affecting operational routes, compelling both airlines to appeal to New Delhi for assistance in alleviating some financial burdens associated with private airports.

Both carriers are grappling with challenges stemming from geopolitical tensions. With Indian airlines already unable to use Pakistan’s airspace due to strained relations with Islamabad, the recent hostilities in Iran have necessitated longer flight paths for international routes. IndiGo has rerouted flights to the UK via Africa, while Air India has introduced additional stops on certain North American routes.

Request for Financial Relief

The two airlines are actively lobbying the Indian government to implement tax relief measures aimed specifically at aviation-related fees and charges. IndiGo is seeking a reduction in taxes on aviation turbine fuel, which constitutes a substantial portion of operational expenses, accounting for 30-40% of total costs. Currently, this fuel is subject to an 11% federal tax, with some states imposing additional levies as high as 29%.

Despite multiple attempts to engage in dialogue, IndiGo, Air India, and India’s civil aviation ministry have not provided comments regarding these requests for financial support. As of January, IndiGo held a significant domestic market share of 63.6%, while Air India Group represented 26.5% of the market.

Concerns Over Airport Charges

In addition to tax relief, both IndiGo and Air India are advocating for the rationalization of various charges imposed at privately-owned airports. The airlines argue that passenger fees at these facilities are often higher than those at state-run airports, leading to additional financial strain that needs to be addressed.

Recent data indicates that the airlines operated only 36% of their scheduled flights to international destinations, including the Middle East, Europe, and North America, from February 28 to March 9. This period coincided with the beginning of military actions by the US and Israel against Iran, drastically affecting flight operations.

Impact of Geopolitical Factors on Profitability

Financial analysts at HSBC have indicated that the prevailing situation in the Middle East will place a considerable burden on the costs and profitability of Indian airlines. Air India, owned by the Tata Group and Singapore Airlines, has also petitioned the government to lower local taxes on premium economy tickets from 18% to 5% to enhance competitiveness.

According to reports, Air India anticipates a significant setback of approximately $600 million annually as a direct consequence of the ongoing ban on Pakistani airspace, which has been in place since April 2025. The airline, which transitioned to private ownership in 2022, incurred a loss of $433 million in the previous fiscal year, highlighting the impact of external conditions on its financial health.

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