Government Considers Approving Rs 5,000 Crore in Aid to Airlines Amid Slowing Traffic and Rising Costs Amid Ongoing Tensions with Iran

Government Weighs Relief Measures for Airlines Amid US-Iran Conflict

The prolonged US-Iran conflict continues to pressure the aviation sector, with airlines facing higher operating costs and weaker passenger demand. In response, the government is considering a series of relief measures to support financially stressed carriers.

A key proposal is the Rs 5,000 crore Emergency Credit Line Guarantee Scheme (ECLGS), which could be approved this week. The scheme would offer crucial support to carriers struggling to stay afloat. Additionally, the aviation ministry is working to secure approval for the Hotan route through China, a move that would enable Air India to operate westbound flights while bypassing Pakistani airspace.

This could reduce fuel costs for Air India by avoiding longer diversion routes. Efforts are also underway to seek relief on jet fuel excise duty as base fuel prices remain elevated. These steps follow an earlier 25% cut in landing and parking charges at 34 major airports, which took effect on April 8, along with partial relief in jet fuel price hikes for domestic airlines during the current month.

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The industry is seeking an extension of that support into May. Airlines with stronger balance sheets have warned the government that continued cost pressures may force flight reductions, potentially resulting in fewer services and higher ticket prices. Weaker carriers, meanwhile, face the risk of shutting operations, which could hurt connectivity and employment.

Key Figures and Proposed Relief Measures

Under the proposed ECLGS, assistance may be capped at Rs 1,500 crore per airline. Ministry officials have indicated that while IndiGo would qualify under the scheme, it may not require the funding due to its relatively stronger financial position. One financially stressed airline has nearly exhausted its funds and has struggled to make timely payments of salaries, provident fund dues, and tax deductions for several months, raising compliance concerns.

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Continued operations for such carriers may depend on emergency financing. On the routing issue, Air India has submitted a plan for its Airbus A350 and Boeing 787-9 wide-body aircraft to use a China-based corridor. Flights from Delhi and Mumbai to Europe, the UK, and the US would travel via Leh, enter Chinese airspace, and turn near Hotan toward Kyrgyzstan before rejoining existing routes.

Air India believes the proposed path would reduce dependence on Pakistan's airspace decisions while helping limit extra fuel burn caused by current detours.