The Airline's Share: Base Fare & Surcharges
The first component of your ticket is the base fare. This is the core price the airline charges for transporting you from one city to another. It's the most dynamic part, influenced by demand, competition on the route, and how far in advance you book.
Alongside this is the fuel surcharge, which airlines add to cover the volatile cost of Aviation Turbine Fuel (ATF). Together, these two elements are what the airline directly controls and are often what people assume makes up the bulk of the ticket. However, they are only the beginning of the story. While airlines are often blamed for high prices, their share of the final fare can be surprisingly small. For example, on a ticket costing around ₹4,600, less than half might actually go to the airline.
Fuel on Fire: The ATF Burden
Aviation Turbine Fuel (ATF) is the single largest operating expense for Indian airlines, accounting for 35-45% of their total costs. India's jet fuel prices are among the highest in the world, not just because of global crude oil prices but due to a heavy tax structure. Unlike many other goods, ATF is not under the GST regime. This means that state governments levy their own Value Added Tax (VAT), which can be as high as 20-30%. This heavy taxation means that even when global oil prices fall, Indian passengers rarely see a proportional drop in fares. For instance, on August 1, 2026, ATF prices were hiked by ₹5 per litre to ₹115, reversing a cut from the previous month and putting fresh cost pressure on airlines.
The Tax Man Cometh: GST and Other Levies
On top of the airline's charges and fuel costs, the government adds several taxes. The Goods and Services Tax (GST) is applied to the base fare. For economy class, the rate is 5%, while business and other premium classes attract a higher 18% GST. Beyond GST, there are other statutory fees collected on behalf of the government. These include the Aviation Security Fee (ASF), which funds the security infrastructure at airports, and a small cess for the regional connectivity scheme, UDAN, which aims to make flying more accessible in smaller towns. These are non-negotiable charges that are simply passed on to the passenger.
Paying for the Airport: A Raft of Fees
A significant chunk of your ticket price goes towards paying for the use of airport facilities. These charges have risen sharply in recent years, especially with the privatisation and modernisation of major airports. The two main fees are the Passenger Service Fee (PSF) and the User Development Fee (UDF). The PSF is levied to cover the cost of security and other passenger facilities provided by the airport authority. The UDF is a specific charge levied by airport operators to finance the development or expansion of the airport. These fees vary significantly from one airport to another, with major metro airports charging considerably more than smaller ones. According to IndiGo's Managing Director, airport charges like landing fees and UDF have risen by as much as 34% and 95% respectively over three years, while the airline's own fare component has risen by only 1-3%.
Market Dynamics: Competition and Capacity
Finally, the laws of supply and demand play a crucial role. When major airlines face financial trouble or suspend operations, as seen with Go First, thousands of seats vanish from the market overnight. This reduction in supply, especially during peak travel seasons, inevitably drives up prices on remaining flights. The Indian domestic market has become highly concentrated, with a single airline holding a majority share. While this has led to efficiency, it also means that disruptions at one major carrier can have an outsized impact on the entire network and lead to higher fares for consumers due to reduced competition.
