Indian airfares may stay elevated despite easing jet-fuel costs
S&P Global Ratings expects Indian and Asia-Pacific carriers to maintain higher fares as resilient demand and cost recovery priorities offset softer fuel prices. Low-cost airlines face greater pressure, with fuel accounting for roughly 40% of costs versus 33% for full-service peers.
What happened
S&P Global Ratings expects Indian and Asia-Pacific airlines to retain elevated fares despite easing jet fuel prices, as demand remains resilient and carriers
Key facts
- Passenger yields increased about 10-15% year-on-year as of June 2026
- Asia-Pacific passenger traffic demand contracted 1-2% year-on-year in May and June
- Jet fuel prices exceeded $240 per barrel by end-March 2026
- Brent crude forecast at $110 per barrel in 2026 and $80 per barrel in 2027
- Fuel represents nearly 40% of low-cost carrier costs versus around 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
Airline partnerships, travel-benefit programs, and procurement agreements may become more valuable as sustained fare inflation pressures corporate travel budgets.
What to watch
- Monthly Indian domestic passenger traffic growth versus available-seat capacity growth.
- Reported passenger yields, load factors, and unit revenues at major Indian and Asia-Pacific carriers.
- Jet-fuel prices relative to fare changes and airline fuel-hedging disclosures.
- LCC EBITDA margins, debt servicing metrics, lease costs, and announcements of ancillary-fee increases.
- Changes in airport retail sales per passenger, travel-card spend, hotel bookings, and discretionary retail sales in major departure cities.
- Regulatory intervention on airfare caps, airline fees, airport charges, or consumer-protection rules.
- Maintain elevated travel budgets and avoid assuming fuel-cost declines will reduce employee travel expenses or consumer trip costs.
- Retailers with exposure to travel demand should emphasize airport, transit-hub, luggage, travel-accessory, insurance, and on-the-go food-and-beverage formats.
- Expect consumers to trade down within destination spending: shorter trips, lower hotel tiers, reduced shopping budgets, and more selective premium purchases.
- Airline-linked loyalty and co-branded card programs may become more valuable as carriers use rewards, bundles, and ancillary offers to defend realized yields.
- Monitor LCC financial stress for route cuts, capacity rationalization, and consolidation opportunities that could further reinforce pricing power.