Air India Raises Fuel Surcharges as Iran War Hits Airline Costs

Air India is rolling out higher fuel surcharges after saying the war involving the US, Israel, and Iran has caused a sharp rise in jet fuel prices.

The airline said the changes would be introduced in phases across both Air India and Air India Express.

The first phase starts on March 12 and covers India, SAARC countries, West Asia, the Middle East, Southeast Asia, and Africa. The second phase begins on March 18 for Europe, North America, and Australia. A date for East Asia markets, including Hong Kong, Japan, and South Korea, has not yet been announced.

Why Air India says it had to act

Air India said aviation turbine fuel makes up nearly 40 percent of airline operating costs, and that recent price increases have put serious pressure on the business. It also pointed to high excise duty and value-added tax on fuel in major cities, such as Delhi and Mumbai, which make the impact even harder to absorb.

The airline said the surcharge is needed to help keep flights financially viable. Without it, some services may not cover their operating costs and could face cancellation.

The move comes during a difficult period for Indian airlines

The surcharge comes at a time when Indian aviation is already under pressure. Passenger demand remains strong, but airlines are also dealing with fuel price volatility, exchange-rate changes, high operating costs, supply chain problems, and intense fare competition.

Air India is still in the middle of an expensive turnaround after Tata Group took control in 2022. The airline is expected to post a loss of at least INR 150 billion ($1.6 billion) for the financial year ending March 31, 2026. That helps explain why the airline is moving quickly to protect route economics.

IndiGo’s leadership change adds to industry uncertainty

The wider market also faced another shock this week when IndiGo CEO Pieter Elbers stepped down. Co-founder and managing director Rahul Bhatia has taken interim control.

The resignation follows a major disruption in December, when IndiGo canceled more than 2,500 flights over three days after failing to prepare properly for new pilot duty-time rules.

Photo by John McArthur on Unsplash