New Delhi, March 17: Rising tensions in the Middle East may exert pressure on the profits of budget airline Indigo in the near term, according to a recent report.
Moody’s Ratings stated that high oil prices will impact margins in the short run. However, the airline’s ticket booking cycle, which spans 30 to 45 days, may help in passing on the increased costs over time.
The report highlighted that Indigo does not hedge fuel prices, making it more vulnerable to sudden spikes in fuel costs. Recent tensions escalated after military strikes by Israel and the U.S. on Iran on February 28, disrupting air travel in parts of West Asia, raising crude oil and jet fuel prices, and forcing airlines to adopt longer routes due to closed airspace.
The report noted, “Rising global jet fuel prices will affect airline profits.” According to the findings, fuel is the second-largest expense for airlines after labor.
Following the conflict, Brent crude prices surged to nearly $100 per barrel, approximately 45% higher than the average in 2025. The report indicated that jet fuel prices in the U.S. Gulf Coast region have exceeded $3.50 per gallon, marking a 65% increase from the previous year’s average.
Despite Indigo’s operations on West Asian routes, which account for about 18-20% of its revenue, its strong position in the domestic market offers some relief. The airline holds approximately 64% of the domestic aviation market share, with nearly three-quarters of its revenue generated from domestic operations.
Moody’s reported that Indigo has attempted to resume flights on certain European routes using alternative flight paths amid airspace restrictions, although it has seen limited success so far.
In the medium term, if disruptions continue, the airline retains the flexibility to redeploy aircraft on domestic routes or expand operations in Southeast Asia.
However, Moody’s cautioned that Indigo will continue to face challenges from rising fuel costs, increased flight durations due to route changes, and foreign exchange volatility stemming from a weaker rupee.
The report stated that every $1 increase in jet fuel prices raises its monthly fuel expenditure by approximately ₹20-25 crore.
My name is Bhupendra Singh Chundawat. I am an experienced content writer with several years of expertise in the field. Currently, I contribute to Daily Kiran, creating engaging and informative content across a variety of categories including technology, health, travel, education, and automobiles. My goal is to deliver accurate, insightful, and captivating information through my words to help readers stay informed and empowered.
Leave a Comment