IndiGo raises fares, but fuel surge keeps losses high

New Delhi: IndiGo beat analyst estimates in the seasonally weaker September quarter as higher ticket prices boosted revenue and helped narrow losses. But a steep rise in fuel costs continued to weigh on its bottomline, underscoring the challenge facing India's largest airline.

InterGlobe Aviation, which operates IndiGo, posted a 26% increase in revenue to ₹23,364 crore in the July-September quarter, helped by stronger fares. Net loss narrowed to ₹1,879 crore.

Still, much of that improvement was offset by a soaring fuel bill. Fuel expenses jumped 67% to nearly ₹10,000 crore as global energy prices rose. Stripping out currency fluctuations, IndiGo lost ₹724 crore in the July-September period, compared to a ₹104 crore profit a year ago.

The results reflect the tough environment airlines are navigating. While higher fares have supported earnings, passenger demand has softened, and fuel remains expensive. IndiGo expects capacity growth to pick up in the current quarter, but management cautioned that elevated fuel prices are likely to persist.

However, losses were lower in the last quarter because the airline recorded a larger foreign exchange loss the previous year.

In the second quarter, fuel now takes 43 paise of every rupee of revenue, up from 32 paise in the July-September period last year.

“We haven’t been able to offset the very significant increase in the fuel bill,” IndiGo chief executive William ‘Willie’ Walsh said during a media call following the results.

Walsh said the airline expected to recover only about 60% of the increase in fuel costs through higher fares and surcharges, leaving it exposed to elevated prices.

“We’re looking at a period of elevated fuel costs for some time to come,” he said, adding that 50-60% of IndiGo’s non-fuel costs were dollar-denominated, making the airline vulnerable to rupee depreciation.

Encouragingly, IndiGo expects capacity growth to return in the December quarter.

“We will see growth in the third quarter, low single-digit growth in terms of ASK (Available Seat Kilometres),” Walsh said.

On demand, Walsh said the September quarter was seasonally the weakest but remained optimistic about the outlook. “I continue to be optimistic about the long-term growth opportunities,” he said, citing what he described as continuing robust demand despite elevated airfares.

IndiGo’s performance underlines a slowdown in domestic air travel. India’s passenger traffic fell 1.81% year-on-year to 78.61 million in April-September, from 80.06 million a year earlier, based on monthly figures compiled from DGCA data. Traffic fell 4.76% in July, 6.2% in August and 6.19% in September to 11.82 million. May was the only month to record growth, with passenger numbers rising 9.46% to 15.39 million.

“For IndiGo, weaker industry traffic creates a difficult balance. Higher fares have supported yield, but falling passenger volumes and a lower load factor suggest demand remains under pressure,” said Shobhit Singhal, associate director at brokerage Anand Rathi Institutional Equities. If fuel costs remain elevated, the airline’s ability to pass on further increases through fares without weakening demand could become more limited.

IndiGo’s revenue per available seat kilometre (RASK) rose 26.4% year-on-year to ₹5.76 in the September quarter, while cost per available seat kilometre (CASK) increased 20.6% to ₹6.22.

The airline added 25 aircraft over 12 months, taking its fleet to 442 even as its passenger load factor, which measures the proportion of available seats filled, fell to 80.3%.

Simply put, IndiGo sharply raised ticket prices, thereby earning more per passenger. But higher fares coincided with weaker demand, fewer passengers and lower seat occupancy.

“So far, IndiGo has shown a resilient performance with topline being driven by ticket price rise. However, higher fuel costs will continue to impact margins,” said Singhal of Anand Rathi.

Jainam Shah, aviation analyst at Equirus Securities, said IndiGo’s pricing power partly helped offset elevated fuel costs. “However, profitability remains sensitive to fuel price movements,” he said.

IndiGo shares closed at ₹4,674 on Thursday, up 0.2%, on BSE.

• Higher ticket prices lifted revenue despite weaker passenger demand overall.
• Fuel costs surged sharply, preventing a stronger profit recovery quarter.
• Revenue exceeded analyst forecasts while losses came below expectations levels.
• Domestic aviation demand softened as passenger traffic declined year-on-year significantly.
• IndiGo expects growth ahead but margins remain fuel-price dependent heavily.

Abhishek Law has spent 18 years in journalism, which in news industry terms means he has survived several newsroom restructurings, countless “urgent” press releases, and more cups of tea than he can reasonably count. Based in New Delhi, he covers aviation for Mint, a sector where aircraft, oil prices, geopolitics and airline CEOs regularly conspire to make his life interesting.<br><br>Most of his time gets occupied by translating airline jargon like ASKs, yields, load factors and fleet strategies into language that doesn’t require a pilot’s licence. His motto is simple: if readers need a glossary, he hasn’t done his job properly.<br><br>On most days, the quadragenarian is tracking airline strategies, policy changes and the occasional mid-air disruption that suddenly become a stock market story. When planes are behaving themselves (which is not very often nowadays), he strays into other corporate beats like steel, trying to figure out what’s really happening.<br><br>He loves to talk, especially ask—that one more question which people are uncomfortable with, and saving contacts in his phone as a "Source who may or may not pick up calls”. <br><br>But, on a serious note, the goal remains simple: cut through jargon, find that additional detail, and turn complicated business stories into something one can actually enjoy reading.

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