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Fuel cools, but India flights may stay costly

By Sohail Khan 26 August 2026, 2:03 pm

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Business News›Industry›Transportation›Airlines / Aviation›India’s flights may stay expensive even as fuel gets cheaper: S&P

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India’s flights may stay expensive even as fuel gets cheaper: S&P
Synopsis

Asia-Pacific airlines may maintain higher airfares as passenger demand remains strong. This strategy allows carriers to recover elevated operating costs and bolster financial buffers. Jet fuel prices surged earlier but have since eased, though volatility persists. Airlines expect margins to improve from the fourth quarter with seasonal demand increases. Growing middle classes and economic growth in China and India support future passenger demand.

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Asia-Pacific airlines may maintain higher airfares as passenger demand remains strong

Airfares in India and across the Asia-Pacific region could remain elevated even as jet fuel prices ease, with resilient passenger demand giving airlines room to retain higher ticket prices, S&P Global Ratings said in a report, as cited by ANI.

The ratings agency said airlines may be reluctant to cut fares quickly as travellers have so far remained relatively responsive to higher ticket prices. Passenger yields in the region rose around 10-15% year-on-year through June 2026, according to S&P.

Also Read: Air passenger service prices surge 31.9% in Q1 FY27: Govt data

Despite the increase in fares, passenger demand fell only 1-2% year-on-year in May and June. S&P said part of the decline was also due to airlines reducing capacity during the period.

Load factors, which measure the share of available seats occupied, have remained broadly stable, indicating that higher fares have not significantly weakened demand.

The trend follows a sharp rise in jet fuel prices, which climbed above USD 240 a barrel by end-March 2026 amid supply disruptions linked to the Middle East conflict. Prices have since eased, although S&P expects geopolitical uncertainty to keep fuel costs elevated through the rest of the year.

The agency expects airline margins to improve more significantly from the fourth quarter as seasonal demand strengthens. It expects Brent crude prices to fall to USD 80 a barrel in 2027, from an assumed USD 110 a barrel in 2026.

Low-cost airlines could remain more exposed to high fuel costs, with fuel accounting for nearly 40% of their expenses, compared with about 33% for full-service carriers.

Also Read: India overtakes China in premium intercontinental demand: Lufthansa Exec

Among airlines that had reported June-quarter results, S&P estimated the average year-on-year decline in EBITDA margins at about 15% for a low-cost carrier, compared with around 9% for full-service airlines.

Despite the near-term cost pressures, S&P expects passenger demand across Asia-Pacific to remain resilient, supported by expanding middle classes and economic growth in China and India.

(With inputs from ANI)

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