S&P: Indian airfares may stay high despite lower fuel costs
S&P Global Ratings expects airlines to preserve elevated fares as demand remains resilient, even if jet-fuel costs ease. Low-cost carriers face heavier fuel exposure, while sector margins are projected to improve from the fourth quarter.
What happened
S&P Global Ratings expects Indian airfares to remain high despite easing jet fuel costs, as resilient passenger demand lets airlines preserve yields. Low-cost
Key facts
- Passenger yields rose 10-15% year-on-year through June 2026
- Passenger demand fell 1-2% year-on-year in May and June
- Jet fuel exceeded USD 240 per barrel by end-March 2026
- Fuel represents nearly 40% of low-cost carrier costs versus about 33% for full-service carriers
- Average EBITDA margins declined about 15% year-on-year for low-cost carriers and 9% for full-service airlines
- S&P assumes Brent crude at USD 110 per barrel in 2026 and USD 80 per barrel in 2027
Why this matters
Persistent pricing power and improving margins could increase the strategic appeal of airline partnerships, capacity acquisitions, and ancillary-revenue platforms in India.
What to watch
- Monthly domestic passenger traffic, load factors and airline capacity additions
- Average domestic fares and passenger-yield trends through the holiday and winter travel seasons
- Jet-fuel prices, rupee movement and airline fuel-hedging disclosures
- Low-cost carrier EBITDA margins and commentary beginning with Q4 results
- Airport retail sales per passenger, luggage sales and travel-related card-spend data
- Evidence of discounting or promotional fare activity from major carriers
- Retailers serving urban discretionary consumers should monitor travel-spend exposure and avoid assuming lower fuel prices will immediately improve non-travel demand.
- Airport, travel-retail and luggage operators can prioritize premium assortment, last-minute convenience products and higher-margin food-and-beverage offerings while passenger yields remain strong.
- Mall operators and restaurant chains in major metros should prepare targeted weekday and non-holiday promotions if travel absorbs a larger share of discretionary budgets.
- Consumer brands with travel-linked demand can time campaigns around holiday booking periods, airport expansion and new-route announcements rather than fuel-price movements alone.