IATA warns of flight cuts as fuel spikes and Gulf travel slumps

More flight cancellations could be on the horizon for Indian carriers if jet fuel prices refuse to budge from current highs, the International Air Transport Association (IATA) warns. The Indian carriers are caught in a pincer of skyrocketing aviation turbine fuel (ATF) costs, cooling demand, and restricted route networks, leading to schedule trimming to cope with the margin squeeze.

The pressure is global, too: IATA expects the global airline industry’s net income to halve to USD 23 bn in 2026. Net income per passenger is projected to fall to USD 4.50 from USD 9.10 in 2025, while the industry’s net margin is expected to decline to 2%. ATF rates are currently 62% higher than in November. “If the situation continues, there will have to be more demand destruction,” Hemant Mistry, director of energy transition at IATA, said.

India’s ATF cushion: To insulate domestic carriers, the Indian government has launched an INR 100 bn (USD 1.1 bn) ATF price stabilization fund. The capital relief will be routed through state oil marketing companies to subsidize both domestic and international operations of scheduled Indian airlines. “The ATF price stabilization fund is a very good solution to address the problem. It is a very good output from the government,” according to Mistry.

The demand is also weakening. Outbound international travel by Indians plummeted by over 20% in March and April as Gulf hostilities choked off key flight paths, according to provisional data from the Union Tourism Ministry picked up by Hindu Businessline. Indian international departures fell 22.5% y-o-y to 2.2 mn in April, following a steep 28.6% drop to 1.83 mn in March.

Outbound demand has weakened, especially to the US and Europe, because of higher airfares and fuel surcharges, while leisure travel to the Middle East and some corporate travel have also been deferred.

Why the Gulf corridor matters: The UAE accounts for more than 25% of Indian outbound traffic, with Dubai and Abu Dhabi serving as major transit hubs. Traffic to the UAE, Saudi Arabia, and other Gulf markets fell because of airspace closures and flight cancellations, while Kuwait and Qatar dropped out of the top destinations for Indian travelers. Foreign arrivals into India fell by more than 5% in March and 14% in April.

Airspace squeeze adds to airline stress

To stabilize network schedules, the Federation of Indian Airlines (FIA) is calling on the Civil Aviation Ministry to mandate a strict six-month notice period before hitting carriers with recurring airspace restrictions, Hindu Businessline reports. The industry lobby group — which represents major domestic operators — argues that the government’s habit of dropping late-stage or frequently revised notices to airmen (NOTAMs) for major national events like Republic Day, Independence Day, and the Aero India show. These last-minute disruptions force airlines to repeatedly tear up scheduled flight blocks, execute cascading cancellations, and re-engineer complex network rotations on the fly.