India airfares may stay elevated despite easing jet-fuel costs, S&P says
Airlines serving India are likely to maintain higher fares as resilient travel demand supports yields. S&P Global Ratings expects margin recovery to become more meaningful from Q4 2026, though low-cost carriers remain more exposed to fuel costs.
What happened
Asia-Pacific airlines · S&P Global Ratings expects airlines serving India to keep fares elevated despite easing jet fuel costs, as resilient demand supports
Key facts
- Passenger yields rose about 10-15% year-on-year as of June 2026
- Asia-Pacific passenger traffic demand fell 1-2% year-on-year in May and June
- Jet fuel exceeded $240 per barrel by end-March 2026
- Brent crude is forecast at $110 per barrel in 2026 and $80 per barrel in 2027
- Fuel represents nearly 40% of low-cost carrier costs versus about 33% for full-service airlines
- Average June-quarter EBITDA margin decline: about 15% for low-cost carriers and 9% for full-service carriers
Why this matters
Prioritize scale, network breadth, and revenue-management capabilities in partnership or acquisition targets, as durable pricing power favors carriers less dependent on low-fare volume.
What to watch
- Monthly India domestic passenger traffic growth versus available seat capacity growth
- Airline yield, load-factor, and unit-revenue disclosures for Q3 and Q4 2026
- Jet-fuel prices, crude oil moves, and INR/USD depreciation
- IndiGo, Air India group, Akasa Air, and SpiceJet fleet-delivery and route-expansion announcements
- Fare data on major domestic routes and the frequency of sale-led promotional campaigns
- Hotel average daily rates, travel-credit-card spending, and airport retail sales per passenger
- Signs of leisure demand weakening, including lower advance bookings, shorter booking windows, or rising cancellations
- Favor travel-exposed businesses with pricing power, including airport retail, premium luggage, travel payments, and loyalty ecosystems, over airlines dependent on discount-led volume growth.
- Expect consumers to protect travel budgets by trading down in accommodation, dining, local transport, and non-travel discretionary categories.
- Monitor airline promotional intensity: limited discounting despite lower fuel costs would confirm industry capacity discipline and support continued elevated yields.
- Watch for higher business-travel and premium-cabin demand to shift airline revenue mix toward less price-sensitive passengers.
- Assess tourism-dependent retailers and destination merchants for a volume-versus-spend split: passenger growth may remain healthy while per-trip non-air spend compresses.