Indian Aviation Industry Eyes Rs 38,000 Crore Loss: Will Airlines Pass Rising Fuel Costs To Passengers?

The Indian aviation industry continued to face margin pressure and is expected to post net losses of Rs 36,000-38,000 crore in the current fiscal year amid rising operational costs due to elevated aviation turbine fuel (ATF) and a slowdown in passenger traffic. However, according to rating agency ICRA, aviation companies are unlikely to pass on rising input costs to passengers. Meanwhile, Indigo, India’s largest domestic airline, posted a loss of Rs 1,879.1 crore for the second quarter of the current fiscal year (Q2 FY27).  

Last fiscal, the industry suffered a loss of Rs 28,000-30,000 crore, ratings agency ICRA said on Thursday, October 29.

Key Factors Drag Profitability For Civil Aviation Sector

• ICRA noted that a moderation in growth of passenger traffic and a rise in aviation turbine fuel (ATF) prices are the key factors weighing in on aviation companies' profits.
• Forex losses that are arising from the sharp depreciation of the Indian rupee are one of the key factors as well.
• The beginning of war in the Middle East in late February this year will likely dampen air passenger traffic growth in the financial year under review, ICRA noted.
• An upside lease rentals cost is projected to be a cause in a total net loss of Rs 36,000-38,000 crore in this fiscal for the Industry.
• However, the ICRA noted that these escalations in cost may not be passed on to passengers through fare hikes. 

Indigo Q2 Results 

InterGlobe Aviation, the parent company of IndiGo, reported a net loss of Rs 1,879.1 crore in the July-September period on the back of higher fuel costs and a dip in the Indian rupee.  However, the airline's losses narrowed compared to Rs 2,582.1 crore in the same period a year ago.

"We responded with prudent capacity reduction and yield management, supporting strong revenue performance but only partially offsetting the higher costs. Despite these actions, the quarter resulted in a net loss of around 19 billion rupees," IndiGo CEO Willie Walsh said in a release.