US-Iran conflict may push up airfares in India as fuel costs climb

Middle East tensions could lead to increase in domestic airfares.

• US-Iran conflict may push up airline ticket prices in India
• Rising oil prices could increase airfares by 10–15 percent
• Domestic fares stable now but may rise if conflict continues

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The escalating US-Iran war, which has ensnared the Gulf countries, could soon begin to show up in airline ticket prices in India, as rising global oil prices threaten to push up the cost of aviation turbine fuel (ATF), the single largest expense for air carriers.

If crude prices remain elevated, Indian airlines may be forced to pass on a part of the cost burden to passengers, pushing up both international and domestic fares ahead of a busy travel season, as schools shut down for holidays.

Domestic airfares could rise by around 10–15 percent if the situation persists and fuel costs continue to climb, Govind Gaur, CEO of travel platform WanderOn, told Moneycontrol.

“The major increases are currently being witnessed on international routes due to airspace closures and cancellations. However, there are early indications of rising airfares on domestic routes too, particularly on high-demand sectors such as Delhi–Mumbai, Bengaluru–Delhi and Mumbai–Hyderabad,” he said.

Oil on fire

Since February 28, when US and Israel launched strikes on Iran, benchmark Brent crude prices have climbed from around $72.48 a barrel to nearly $80.

ATF accounts for nearly 30–40 percent of operating expenses for airlines and can form up to around 45 percent of airfare structure, making the sector extremely sensitive to fluctuations in global oil prices, Federation of Aviation Industry in India chairperson, aviation cargo, Dr Vandana Singh said.

The widening conflict that has seen Iran launch strikes against US allies and assets in the West Asia have raised supply concerns.

Iran has warned it will fire on ships that pass through the Strait of Hormuz, which carries 50 percent of India’s oil and 20 percent of the world’s crude shipments.

Tanker traffic has virtually come to a halt in the strait, as reported by Moneycontrol, forcing a rerouting of supplies, which will make the route longer and add to costs.

“Any geopolitical tension in the Middle East can push global oil prices higher, which directly affects ATF pricing in India because fuel rates are revised regularly based on international benchmarks and currency movements,” Singh said.

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With recent hikes pushing ATF prices toward Rs 1 lakh a kilolitre in major metros, airline operating costs are already under pressure, she said.

Because airlines operate on thin margins, higher fuel costs typically translate into higher ticket prices. “When operating costs rise due to higher fuel prices, airlines usually adjust fares across their entire network rather than only on international routes,” Singh said.

This means that even domestic airfares within India could rise if the conflict continues to keep crude prices elevated.

Domestic prices stable, so far

Not all travel platforms are seeing a broad-based rise yet. Bharatt Malik, senior vice president, air and hotel business, Yatra Online, said domestic pricing trends currently remain stable.

“At this stage, we have not observed any systemic increase in domestic airfares and pricing trends within India remain stable,” Malik said.

The conflict adds another layer of uncertainty for airlines and travellers. The escalation comes during the summer travel season, when airlines typically operate with high load factors due to school holidays and increased leisure travel demand.

During such periods even a moderate rise in fuel costs can translate into higher ticket prices on busy routes where demand is strong.

Industry executives say airlines now face a delicate balancing act between absorbing higher costs and passing them on to travellers.

“Airlines are hit by the current situation and it’s a catch-22 for them. They have to decide how much of the cost increase they can pass on to customers, because if ticket prices rise too sharply, travellers may also think twice before flying,” CEO and co-founder of travel platform Pickyourtrail Hari Ganapathy said.

West Asia remains one of the world’s most critical oil supply regions and a prolonged conflict could mean elevated prices for an extended period. As it coincides with peak travel season, Indian passengers may be looking at higher fares, fewer discounts and tighter seat availability.