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'No choice left but to look to increase fares': IndiGo CEO on 'very significant' rise in fuel bill
The warning comes as IndiGo’s parent company, InterGlobe Aviation Ltd, reported a loss for the third consecutive quarter.
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IndiGo CEO Willie Walsh has said the airline has “no choice left but to look to increase fares” as it faces a “very significant” rise in its fuel bill. The warning comes as IndiGo’s parent company, InterGlobe Aviation Ltd, reported a loss for the third consecutive quarter, with surging fuel expenses offsetting the gains from higher fares.
The airline’s loss narrowed in the July-September quarter compared with a year earlier, but remained substantial despite an increase in revenue, Bloomberg reported. Walsh said the airline did not expect immediate relief from elevated fuel costs.
“We are looking at a period of elevated fuel cost for sometime,” he said, adding that IndiGo would continue to explore internal measures to absorb the increase. “We will continue to look at every measure that can be taken internally to offset the very significant increase in our prices,” he said.
IndiGo raises fuel charges
Jet fuel can account for around 40% of an airline's operating costs, leaving carriers vulnerable to sharp price increases and increasing the likelihood of higher ticket prices, as per Reuters. India’s largest airline has already revised fuel charges on domestic and international routes amid a sustained increase in jet fuel prices.
The latest revision, effective October 6, came after IndiGo said the month-on-month increase in ATF prices had exceeded 14%, taking costs to among their highest levels in the past decade, HT reported earlier.
Under the revised structure, IndiGo’s fuel charges on domestic flights range from ₹375 to ₹1,300, depending on the distance travelled. The charges were raised by ₹100 to ₹350 per sector.
For international flights, the revised charges vary by destination, ranging from ₹1,000 to ₹10,000. Flights to Europe attract a fuel charge of ₹10,000, while flights to Southeast Asia, the Gulf region and parts of East Asia attract a charge of ₹5,500.
IndiGo’s loss narrows, but fuel costs surge
According to Bloomberg, InterGlobe Aviation reported a net loss of ₹1,879 crore for the quarter ended September 30, lower than the loss recorded a year earlier and below the average analyst estimate of ₹2,063 crore in a Bloomberg survey.
Revenue increased 26% to ₹23,364 crore, exceeding analyst expectations. However, total costs rose to ₹26,188 crore, while fuel expenses surged 67% from a year earlier to nearly $1 billion, Bloomberg reported.
In its earnings statement, Walsh said the airline had faced unusually high fuel costs during the seasonally weaker September quarter, alongside continued geopolitical uncertainty.
“The seasonally soft September quarter saw exceptionally elevated fuel costs and continued geopolitical turmoil,” he said. He added that the steps taken by the airline had supported revenue but could only partly offset the increase in expenses.
The July-September period typically sees relatively subdued domestic air travel in India. Demand is expected to improve during the festival season, potentially providing some support to airlines as travel picks up.
Passenger numbers fall as airline cuts capacity
IndiGo carried 27.5 million passengers during the quarter, 4.5% fewer than a year earlier. It also reduced capacity by 1% as part of efforts to manage costs.
Passenger yield -- the average revenue earned per passenger -- increased 34% year-on-year, according to Bloomberg. However, the airline’s passenger load factor, which measures how much of its available seating capacity is occupied, declined to 80.3% from 82.5% a year earlier.
The company’s debt increased 7.1% from the preceding quarter to ₹87,303 crore, Bloomberg reported. IndiGo expects capacity growth in the December quarter to be in the low single digits.
Why rising fuel costs are pushing airfares higher
Aviation turbine fuel is one of the biggest expenses for airlines, accounting for a substantial share of their operating costs. Sharp increases in fuel prices can squeeze profit margins, particularly when airlines are unable to pass on the entire increase to passengers.
Fuel prices have remained volatile amid geopolitical tensions in West Asia. The impact on airlines is compounded by fluctuations in international oil prices and currency movements. IndiGo’s latest move follows an earlier revision of fuel charges in April. The airline has said it will continue to monitor fuel prices and make adjustments as required.
