NEW DELHI - The Indian government moved swiftly on Tuesday to bolster the country's financially strained airline industry with fresh liquidity support as the West Asia conflict drives up fuel costs and disrupts operations.
The Union Cabinet, chaired by Prime Minister Narendra Modi, approved the Emergency Credit Line Guarantee Scheme, or ECLGS 5.0, which is designed to provide credit guarantees for additional borrowing by MSMEs and scheduled passenger airlines. Official statements indicate the scheme carries an outlay of Rs 18,100 crore and is projected to unlock Rs 2.55 lakh crore in total additional credit, including Rs 5,000 crore dedicated to the aviation sector.
Under the terms, airlines with outstanding credit facilities and standard accounts as of March 31, 2026, can access up to 100 percent of their requirements, subject to a cap of Rs 1,500 crore per borrower and satisfaction of specific conditions. The loans will feature a seven-year tenor inclusive of a two-year moratorium period. The National Credit Guarantee Trustee Company Limited will extend 90 percent guarantee coverage for the airline sector and non-MSMEs.
The intervention addresses short-term liquidity mismatches triggered by the West Asia crisis, which has caused global crude oil prices to surge sharply, with reports indicating Brent crude rising from around $72 to over $118 per barrel in recent weeks. This has driven aviation turbine fuel prices up by nearly 85-100 percent, compounding challenges from airspace restrictions and higher operational costs.
Airlines have already taken mitigating steps. Many carriers have introduced graded fuel surcharges on both domestic and international routes. Reports indicate schedule reductions across the industry, with approximately 3,000 fewer weekly flights planned in the summer schedule compared to the previous year. One major carrier reportedly trimmed hundreds of domestic and international services through July.
The latest credit scheme builds upon relief measures announced in early April by the Ministry of Civil Aviation. These included directing a 25 percent cut in landing and parking charges at airports managed by both the Airports Authority of India and those regulated by the Airports Economic Regulatory Authority. The fee reduction, effective immediately for domestic flights and lasting three months, is estimated to lower airline expenses by around Rs 4 billion.
Industry groups, including the Federation of Indian Airlines representing major carriers such as IndiGo, Air India and SpiceJet, had warned the government that without intervention the sector was on the verge of widespread disruptions or closures. Smaller operators in particular have struggled with salary payments and other obligations amid the cost surge.
Government releases emphasize that ECLGS 5.0 will help businesses maintain operations, preserve employment and sustain supply chains. The guarantee structure minimizes risk for lending institutions, encouraging them to extend fresh credit to eligible borrowers.
This marks the latest in a series of steps by Indian authorities to stabilize civil aviation, a sector viewed as strategically vital but highly sensitive to global fuel volatility and geopolitical events. While larger players like IndiGo and the Air India group may weather the storm through internal resources, the credit line is seen as critical for mid-tier and smaller airlines facing acute stress.
Analysts note the measure arrives as the industry contends with not only elevated fuel expenses but also a stronger dollar impacting rupee-denominated costs. By providing this backstop, authorities aim to avoid repeat scenarios of airline failures that have previously thinned competition in the Indian market.
The scheme will remain open for loans sanctioned until March 31, 2027, according to official notifications. Implementation details will be managed through member lending institutions in coordination with the National Credit Guarantee Trustee Company.