CEO Willie Walsh says the airline has little choice but to raise ticket prices as aviation fuel expenses surge, putting pressure on profitability and operating costs.
New Delhi: Air travel in India could become more expensive as IndiGo considers further increases in ticket prices to offset rising aviation fuel costs. The airline’s Chief Executive Officer, Willie Walsh, has indicated that higher fares may be unavoidable as fuel expenses continue to put pressure on its financial performance.
The comments came after InterGlobe Aviation, IndiGo’s parent company, reported a net loss of ₹1,879.1 crore for the September quarter. The airline’s fuel expenses increased 67.2% year-on-year to ₹9,966.8 crore, significantly affecting its profitability.
Why IndiGo May Increase Flight Ticket Prices
Fuel is one of the largest operating expenses for airlines. For IndiGo, aircraft fuel accounted for nearly 38% of total expenses during the September quarter.
The airline’s total expenses rose 19.2% to approximately ₹26,357 crore, while revenue from operations increased 25.9% to ₹23,364 crore. Despite higher revenue, the sharp increase in fuel expenses and the depreciation of the rupee weighed on its financial performance.
IndiGo has already introduced fuel charges on domestic and international routes to recover part of the additional costs. However, Walsh indicated that these measures had not been sufficient to absorb the increase.
“But we have no choice but to look to increase fares in an effort to offset some of the very significant increase that we’ve seen in the fuel bill,” he said.
Rising Jet Fuel Premium Adds to Airline Costs
Walsh attributed the increase in fuel expenses not only to crude oil prices but also to the widening premium that aviation turbine fuel commands over crude oil, commonly referred to as the crack spread.
He said the crack spread, which has historically averaged around 21-22%, was expected to average approximately 65% this year. Disruptions in refining capacity have contributed to the increase, and the airline expects elevated fuel costs to continue for some time.
The higher cost of aviation fuel has affected airlines globally, adding pressure to operating margins and increasing the likelihood of further fare adjustments.
Rupee Depreciation Further Pressures IndiGo’s Finances
The depreciation of the Indian rupee against the US dollar has added another layer of pressure on the airline. A significant portion of IndiGo’s expenses is dollar-denominated, exposing it to foreign exchange fluctuations.
Walsh said,
“We have got 50 to 60% of our non-fuel costs dollar denominated so we’re clearly significantly exposed to depreciation against the dollar.”
While IndiGo intends to minimise the extent of fare increases to limit the impact on passenger demand, the airline will need to balance ticket prices with passenger volumes and revenue generation.
The development could have implications for travellers planning domestic and international journeys in the coming months, particularly if fuel costs remain elevated.
