On Friday, state-run oil companies in India increased jet fuel prices for international airlines by 5.33%, bringing the cost to $1,511.86 per kilolitre in Delhi, home to the country's busiest airport. This marks the second price hike since April 1, when domestic Aviation Turbine Fuel (ATF) increases were limited to 25% to protect passengers from steep fare hikes. Despite this, international airlines are facing significant challenges as they bear the full brunt of market-linked price increases.

The Federation of Indian Airlines, which includes major carriers like Air India, IndiGo, and SpiceJet, has expressed concern over the sustainability of airline operations, warning the civil aviation ministry about potential flight cancellations due to rising operational costs. In response to the surge in fuel prices, Air India has raised airfares and introduced fuel surcharges, which have negatively impacted customer demand. Data from the Directorate General of Civil Aviation (DGCA) indicates a 0.87% decline in passenger load factors in March compared to February, suggesting a weakening demand.

Industry insiders predict that Indian airlines are entering a challenging period, with profitability under pressure from higher international airfares, rising fuel costs, and decreasing overseas demand. International capacity is estimated to have decreased by 20-25%, particularly affecting routes to the UAE, while only select high-demand routes to the UK and parts of Europe remain viable. Domestic demand may provide some support until mid-June, but sustained high fuel prices could lead to further capacity cuts and margin pressures.