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The Union Cabinet has approved a one-time support package of ₹10,000 crore for oil marketing companies (OMCs) to help stabilise aviation turbine fuel (ATF) prices for Indian airlines, both for domestic and international operations.
How does this work: the government will provide interest-free advances to OMCs.
In simple terms, the government is giving oil companies an interest-free loan to help shield airlines from sudden spikes in fuel prices.
When global ATF prices eventually cool down, the support amount will be recovered and returned to the government's coffers.
Why does this matter: ATF typically accounts for around 40% of operating costs, and during extreme volatility, that figure can climb as high as 60%. The problem has become particularly severe because of the ongoing crisis in the Middle East.
International ATF prices have surged from around ₹60.5 per litre in March 2026 to ₹142 per litre in May 2026, a jump of nearly 2.5 times in just a few months.
While fuel prices for domestic flights are currently capped, Indian airlines still buy fuel for international operations at import-linked prices, leaving them exposed to global oil market shocks.
The impact: Air India is reportedly planning to cut up to 22% of its domestic flights over the next three months, while IndiGo is expected to reduce domestic capacity by 5-7%. The airline has also reportedly trimmed international capacity by around 17%.
Bottom line: this support package won't make fuel cheap, but it could make costs more predictable.
For an industry battling high oil prices, geopolitical tensions and margin pressure, a little stability may be exactly what airlines need right now.
Stock action: shares of Interglobe Aviation, parent company of IndiGo hit 1% on the back of this news.
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