IndiGo CEO says airline has ‘no choice’ but to raise fares as fuel bill jumps 67%

IndiGo says it must raise fares because its fuel expenses have risen much faster than its ability to recover costs. The airline recovered only about 60% of the fuel-cost increase through fares and other measures. The unrecovered portion contributed to a net loss of ₹1,879 crore in the September quarter.

The main pressure is aviation fuel. IndiGo’s fuel bill jumped 67.2% year-on-year to nearly ₹9,967 crore. The airline tried several cost-control measures, but they did not fully offset the increase. Higher fuel prices were caused by both crude oil conditions and a much wider jet-fuel crack spread.

Walsh said IndiGo would try to minimise fare increases because higher prices can affect passenger demand. However, he said the airline had “no choice” but to raise ticket prices. Demand remained strong despite higher fares, and IndiGo expects festive-season travel to support the December quarter.

IndiGo’s fuel bill increased by 67.2% compared with the same quarter a year earlier. It reached nearly ₹9,967 crore in the September quarter. This sharp rise became one of the main reasons the airline reported a net loss of ₹1,879 crore.

The airline did not recover the full increase. IndiGo said it recouped about 60% through higher fares and other measures. That means roughly two-fifths of the added fuel burden remained uncovered, despite cost-management efforts. The article does not provide a precise rupee amount for the unrecovered portion.

The shortfall continues to pressure the airline’s finances. Revenue from operations still rose 25.9% year-on-year to ₹23,364 crore, but fuel prices and a weaker rupee weighed on profits. IndiGo plans to raise fares, while trying to protect passenger demand and maintain long-term expansion.

A crack spread is the difference between the price of refined jet fuel and the price of crude oil used to produce it. It measures how much extra the market charges for the refined fuel. A wider spread means jet fuel becomes more expensive relative to crude.

The spread can rise when refineries cannot produce enough fuel. Disruptions in refining capacity can reduce supplies of refined jet fuel, even if crude oil prices change less sharply. Airlines then pay more for the finished fuel they actually use. The article says the spread historically averaged about 21–22% but was expected to average about 65% this year.

That unusually wide spread added to IndiGo’s fuel bill. Walsh said he had never seen fuel costs like this in his 47 years in the industry. He also warned that fuel costs could remain high for some time, increasing pressure for fare rises.

Fuel is a major airline expense, so a sudden price increase can sharply reduce profit. IndiGo’s fuel bill rose 67.2% year-on-year to nearly ₹9,967 crore. Because the airline recovered only about 60% of that increase, much of the extra cost remained on its accounts.

A weaker rupee adds another layer of pressure. IndiGo has 50% to 60% of its non-fuel costs denominated in US dollars. When the rupee loses value against the dollar, those expenses require more rupees. The airline therefore faces higher costs even if the underlying dollar prices do not change.

The combined effect weighed on IndiGo’s finances. Revenue rose 25.9% to ₹23,364 crore, but the airline still posted a ₹1,879 crore net loss. IndiGo plans fare increases and cost reviews, while continuing its expansion because Walsh views fuel pressure as temporary.

When airlines raise fares, some passengers may postpone trips, choose alternatives, or travel less often. That can reduce bookings and weaken an airline’s revenue growth. The effect matters because airlines need enough passengers to fill their available seats and cover rising operating costs.

IndiGo’s CEO said the airline would try to minimise fare increases to avoid affecting passenger demand. However, IndiGo’s fuel bill had risen 67.2% year-on-year, and only about 60% of the increase had been recovered. The company therefore needs higher ticket prices to recover part of the remaining burden.

So far, demand has remained strong despite higher fares. IndiGo carried 2.75 crore passengers in the September quarter, although that was 4.7% below a year earlier. Walsh remained optimistic about the festive-season quarter and said the airline would take measures appropriate to demand conditions.

Airlines are especially sensitive to fuel prices because aircraft consume large quantities of jet fuel for every flight. A higher fuel price raises the cost of operating existing routes. Airlines cannot always pass the full increase to passengers, since large fare rises may reduce demand.

Exchange rates create another vulnerability. IndiGo said 50% to 60% of its non-fuel costs are denominated in US dollars. If the rupee weakens, those dollar expenses become more costly when converted into rupees. This pressure can affect profits even when passenger numbers and revenue are growing.

IndiGo faced both problems at once. Its fuel bill rose 67.2% year-on-year, while rupee depreciation increased other costs. Revenue from operations rose 25.9%, yet the airline posted a ₹1,879 crore loss. It plans fare changes and network reviews but will continue investing in aircraft and pilots.

Crude oil is the raw petroleum extracted from the ground. Jet fuel is a refined petroleum product made from crude and used to power aircraft. Refining capacity means the ability of refineries to process crude into usable products, including aviation fuel. These concepts are connected because crude must be refined before airlines can use it.

If crude becomes more expensive, producing jet fuel generally becomes costlier. But jet fuel can also rise faster than crude when refining capacity is disrupted. This widens the crack spread, or the premium jet fuel commands over crude. Walsh said the spread was expected to average about 65% this year, compared with a historical 21–22%.

Those costs feed into airline finances and may influence fares. IndiGo’s fuel bill reached nearly ₹9,967 crore, while only about 60% of the increase was recovered. The airline says higher fares are needed to offset part of the pressure.