Industry Odisha Bureau, Oct 08: Fewer passengers are flying as rising fares and costlier jet fuel hit Indian airlines. Analysts expect IndiGo to post another loss in Q2 FY27. Near-term demand remains uncertain.
Indian airlines are charging more for tickets. Yet fewer passengers are boarding their planes. That unusual mix defines a turbulent second quarter for the industry. Expensive crude, driven by the US-Iran war, sits at its centre.
Domestic traffic data analysed by ET Prime show a steady slide. In July–August 2024, about 26.1 million passengers flew, or 421,000 a day. The same months in 2025 saw 25.6 million, or 413,000 daily. This year, the figure dropped to 24.1 million, roughly 396,000 a day. That marks a 7.7% fall over two years. IndiGo’s own traffic is down about 5.6% year on year.
Fuel bill climbs
Jet fuel makes up around 40% of an airline’s operating costs. Average fuel prices in July–September rose about 27% year on year. Domestic carriers were partly shielded by a government decision in April. The petroleum and civil aviation ministries allowed only a staggered pass-through. Just 25% of the fuel price surge was passed on initially. Airlines had warned they might cut flights if hit with the full increase.
Carriers responded by raising fares. One analyst estimates domestic fares are up about 25% year on year. Elara Capital’s Gagan Dixit says IndiGo’s international fares rose 47%. That partly offset a 142% surge in its international jet fuel costs. IndiGo’s international traffic, meanwhile, fell 7%.
This week, IndiGo raised fuel surcharges again. Domestic flyers now pay up to ₹1,300, against April’s maximum of ₹950. Travellers to Southeast Asia and the Gulf face a ₹5,500 surcharge, up 10%. IndiGo called the change measured and modest.
Losses ahead
Higher fares lift revenue per passenger, known as yield. But they do not guarantee profit. ICICI Securities’ Ansuman Deb notes yields are rising on higher fares and lower load factors. Load factor measures how many available seats are filled. Non-fuel cost per available seat kilometre, or CASK, appears to be stabilising. Yet crude remains the larger threat to earnings.
Analysts still expect IndiGo to report a loss for Q2 FY27. Jefferies estimates about ₹1,700 crore, while ICICI Securities sees roughly ₹1,400 crore. A year earlier, the airline lost around ₹2,600 crore in the same quarter. Smaller expected losses suggest fares have absorbed much of the cost shock. ICICI Securities warns the pressure may extend into the usually strong third quarter.
Jefferies’ Prateek Kumar links weak domestic traffic to capacity cuts. Airlines are favouring profitability over volume amid high fuel costs, he says. He expects this to weigh on IndiGo and GMR Airports, which runs Delhi airport.
SpiceJet adds uncertainty. It has yet to publish Q4 FY26 and full-year FY26 results. It declined to say when they would appear.
The bigger question concerns growth. Indian airlines have more than 1,500 aircraft on order from Boeing and Airbus. Those planes will need passengers willing to pay higher fares. With crude still high, that demand looks uncertain.
