Air India and IndiGo, India’s two largest airlines, have announced cuts to their domestic schedules after the Iran conflict drove aviation fuel prices to record levels. Air India will cancel 22% of its planned domestic flights for June and July 2026, while IndiGo has made comparable reductions. Both airlines say affected passengers will be rebooked or given full refunds.
A War-Driven Fuel Crisis
The crisis began in late February, when US and Israeli strikes on Tehran prompted Iran to restrict oil shipments through the Strait of Hormuz. This narrow waterway carries a significant share of the world’s oil supply, and its partial closure sent jet fuel prices sharply higher across Asia and beyond.
For Air India, the numbers are stark. The airline was paying around Rs 80,000 per kilolitre of fuel before the conflict; by late May that had risen to more than Rs 1 lakh — an increase of over 25%. Since fuel already accounts for roughly 40% of the airline’s operating costs, many domestic routes became unviable almost overnight. “We cannot operate certain routes cost-effectively at current prices,” the airline said.
The pressure is not limited to India. In late May, Ryanair CEO Michael O’Leary warned that the conflict had already cost his airline an extra $50 million in fuel during April alone. The European Union also cautioned that jet fuel supplies across the continent could tighten considerably within weeks if the hostilities drag on.
Passenger Impact and Industry Response
Air India is concentrating its cuts on routes where it operates multiple daily flights, reducing these to one service per day and suspending some low-traffic sectors altogether for June and July. Passengers affected by cancellations will be rebooked on the next available flight or given a full refund within seven days.
IndiGo, India’s largest carrier by market share, has also trimmed its domestic capacity, though it has not specified the exact percentage removed. Industry analysts expect further announcements from other Indian carriers before the end of May.
The key question facing the whole industry is how long airlines can absorb elevated fuel costs before raising fares significantly. Several Indian carriers have already applied to India’s Directorate General of Civil Aviation for permission to add fuel surcharges to domestic tickets — a decision the regulator is expected to issue before the end of June 2026.
Key vocabulary:
- Strait of Hormuz – a narrow waterway between Iran and Oman that is one of the world’s most important shipping routes for oil and liquefied natural gas
- fuel surcharge – an extra charge airlines add to ticket prices to help cover unusually high fuel costs; it is separate from the base fare
- Directorate General of Civil Aviation (DGCA) – India’s aviation regulator, responsible for safety standards, airline licences, and rules governing domestic and international flights
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