IndiGo, Air India seek tax relief as airspace bans hit operations, raise cost

IndiGo and Air India have urged the government to cut aviation fuel taxes and reduce private airport charges as the Iran conflict and Pakistan airspace ban force longer routes, raising operational costs and straining airline finances.

India's biggest airline IndiGo INGL.NS is asking the government to cut fuel taxes and, along with rival Air India, pressing New Delhi to get private airports to lower some charges, three sources told Reuters, as conflict in the Middle East adds to the carriers' financial pain.

IndiGo and Air India are facing a double whammy as the Iran war makes it difficult for carriers to use Middle East airspace at a time when Indian airlines are already banned from Pakistan's airspace due to diplomatic tensions between New Delhi and Islamabad.

That has left the two carriers facing higher costs on their international network as they are forced to take longer routes, with IndiGo flying to the UK via Africa and Air India adding a stop on some flights to North America.

The airlines are lobbying the Indian government to provide financial relief, specifically related to aviation-related taxes and charges, said the three sources, all of whom are familiar with the matter.

IndiGo is seeking tax relief on aviation turbine fuel, which makes up 30-40% of an airline's expenses but attracts a federal tax of 11% and additional state levies that can be as high as 29%, said two of the sources.

IndiGo, Air India and India's civil aviation ministry did not respond to requests for comment.