Besides the steep insurance costs, airlines are also grappling with rising aviation turbine fuel (ATF) prices and operational disruptions that are pushing up fares. Executives said ATF prices have already increased significantly and are expected to rise by about 30 per cent as fuel shipments from the Middle East have been disrupted due to the conflict. ATF accounts for roughly 40 per cent of an Indian carrier’s total operating expenses.
Aircraft utilisation has also dropped sharply because airlines are receiving flight slots from Middle Eastern airports only a few hours before departure, forcing them to keep aircraft on standby, executives said. As a result, an airline that would typically operate four to five flights a day is now operating only about two. They are also unable to sell tickets in advance and must release them closer to departure.
Industry executives explained that airline insurance premiums are usually determined on an annual basis and calculated across the entire network.
Typically, an airline pays a fixed premium for a certain number of departures during the year, and that cost is already factored into the normal airfare paid by passengers. The current situation in the Middle East, however, has led insurers to impose additional war-risk premiums specifically for flights operating into conflict-prone regions.
Initially, insurers had barred flights to several Middle Eastern destinations, but they are now permitting operations at sharply higher premiums, the executives said.
Since many outbound flights from India to the region are operating almost empty due to the conflict, the added insurance cost is effectively being recovered from travellers on return sectors such as Dubai-Delhi.
The impact is already visible in ticket prices. Routes that typically cost around ₹10,000-₹15,000 for a Dubai-Delhi ticket are currently being sold at about ₹50,000-₹60,000 by the few carriers that have resumed operations, executives said.
On Thursday evening, SpiceJet was among the few Indian carriers selling seats on the route at around ₹60,000 for Monday and Tuesday, while Air India and other carriers are expected to soon open bookings on sales channels (online websites, etc), with fares likely to be in a similar range.
Airlines operating commercial flights are required to maintain adequate insurance cover for passengers, crew, aircraft hull, cargo and third-party liabilities. In India, this obligation arises from the Carriage by Air Act, 1972, which incorporates provisions of the Montreal Convention governing compensation for passengers and cargo in international air transport.
Compliance is overseen by the Directorate General of Civil Aviation (DGCA), which mandates valid insurance coverage as a condition for granting and maintaining an Air Operator Certificate.
The flight disruption in the Middle East has taken place after Israel and the United States last Saturday launched military strikes on Iran, triggering retaliatory action and leading to widespread restrictions on commercial air traffic across parts of the region. Several countries in the Gulf region have since closed, or restricted sections of their airspace, forcing airlines to cancel flights or reroute them through alternative corridors, such as southern Saudi airspace, which remains open for services to Europe and North America.
Industry executives said fares on Middle East routes are expected to remain sharply elevated until the conflict eases and insurers withdraw the additional war-risk premiums.
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