Airfares May Rise As Fuel Costs Hit Record Highs: IndiGo CEO Willie Walsh

IndiGo CEO Willie Walsh said on Monday that airfares could get higher due to record-high aviation turbine fuel (ATF) prices, even as the airline is trying to absorb as much of the cost increase as possible. 

Walsh, in his first media interaction since he took reins of the airline earlier this year, warned that rising operating costs are putting pressure on the aviation industry's financial sustainability. 

He acknowledged that expensive flight tickets could weigh on passenger demand but added that the hike was necessary to ensure the airline's financial stability. 

"We understand that people would prefer to have lower prices, but we have to have an eye on the financial stability of the company. We're trying to absorb as much as we possibly can," Walsh said.

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Fuel cost accounts for nearly 32 per cent of an airline's operating expenses, making the sharp increase in jet fuel prices a significant strain on profitability. Walsh emphasized that the hike has put unprecedented pressure on the airlines' operations. 

What Caused Jet Fuel Price Hike

The IndiGo CEO attributed the surge in ATF prices largely to an unusually high crack spread, which refers to the price difference between crude oil and refined jet fuel. 

Between 2000 and 2025, the crack spread stood at an average of around 22 per cent, but it has now climbed up to approximately 65 per cent, Walsh said. The increase in crack spread is driven by disruptions in global refining capacity, particularly in Europe. 

Walsh, however, expects the situation to ease as refining capacity and production gradually rebalance. He said elevated fuel prices were a short-term challenge for the industry rather than a long-term concern. Still, with soaring fuel prices, Walsh said that IndiGo slid into a Rs 19-billion net loss and that the carriers are still navigating a brutal operating environment.

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IndiGo Seeks Lower Airport Charges, Tax Relief

Adding to the financial burden on airlines is also the expensive airport infrastructure, Walsh said as he called for a more competitive cost structure in the Indian aviation sector and demanded lower airport charges and taxes. 

"Airport charges are too high. We would do much better if we had lower taxes. So lower taxes, lower airport charges. That's the way forward," he said.

He noted that airport charges had increased by around 4 per cent in the second quarter, while airlines were seeking better value from airport operators.

Walsh also argued that airports, which effectively operate as monopolies, should adopt more competitive pricing. He said he had discussed the issue with Arun Bansal, CEO of Adani Airport Holdings, and hoped to maintain regular engagement with airport operators on the industry's cost concerns.

IndiGo Not Planning Fuel Hedging For Now

IndiGo is currently not hedging its fuel requirements and has no immediate plans to do so until it completes a comprehensive review of its policy, Walsh said. He stressed that fuel hedging was primarily a risk-management exercise rather than a bet on the future direction of oil prices.

Fuel hedging is a contractual tool large fuel-consuming companies like airlines use to reduce their exposure to volatile and potentially rising fuel costs. A fuel hedge contract allows such a company to establish a fixed or capped cost through a commodity swap or option.

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While major Asian airlines typically hedge around 40 per cent of their fuel requirements, European carriers hedge between 70 and 80 per cent, Walsh said. He added that IndiGo's expanding international operations and long-haul ambitions presented an opportunity to reassess its approach.

The airline is also reviewing a proposed fuel price stabilisation scheme. However, Walsh said that IndiGo has not participated in the scheme so far, describing the decision as a cash-flow consideration. The airline would examine the proposal again if it made commercial sense.

Middle East Tensions Disrupt Operations, 30 Daily Flights Cut

Geopolitical tensions and airspace restrictions continue to affect airline operations. Walsh said the closure of Pakistani airspace had forced Indian carriers to recalibrate their networks.

IndiGo has reduced around 30 flights a day, primarily on services to and from Saudi Arabia amid the ongoing situation in West Asia. The airline is closely monitoring developments and will restore services only when it is safe to do so.

"Safety is our number one priority. We will not do anything that creates any risk for our passengers," Walsh said.

He stressed that the aviation industry is facing an unprecedented level of geopolitical disruption but expressed confidence in its resilience and ability to adapt. 

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IndiGo has managed to recover its network in other affected areas, although international capacity saw a marginal reduction during the second quarter.

A350 Deliveries Targeted For 2028, Long-Haul Expansion Plans

Looking ahead, IndiGo is preparing to enter the wide-body long-haul segment with its Airbus A350-900 aircraft. The airline is targeting the second quarter of 2028 for the first delivery, although Walsh acknowledged that the timeline would depend on Airbus and continuing supply-chain constraints.

The A350s are expected to feature a three-class configuration comprising business, premium economy and economy. The business-class cabin is being planned with flatbed seats, with the airline still evaluating the final configuration.

Walsh said IndiGo is committed to expanding its international network without compromising its existing domestic and short-haul operations.

The airline plans to use its A321XLR aircraft to expand into additional destinations in Asia and Europe and Mumbai is expected to be an important departure point for its European operations. IndiGo currently has four XLR aircraft, which may increase to seven next year.

The airline has 60 A350 aircraft on order, as it prepares for a larger international footprint.

Navi Mumbai Airport To Support Expansion

As IndiGo looks to expand its international network, the Navi Mumbai International Airport is expected to complement the airline's operations in Mumbai, Walsh said. IndiGo plans to operate 12 flights from the Navi Mumbai airport. 

Walsh said both Mumbai and Navi Mumbai airports will play an important role in the airline's growth strategy. He also acknowledged the need for further development and better infrastructure at the Mumbai airport's Terminal 1. 

IndiGo Hiring Pilots

IndiGo is currently recruiting pilots in anticipation of future growth and the airline's expanding operations, Walsh said, adding that till September, they had around 6,300 pilots. Drawing on his own experience as a commercial pilot for the first 19 years of his career, Walsh said he understood the demands of the profession.

Despite its ambitions in the premium and long-haul segments, Walsh maintained that IndiGo would continue to operate as a low-cost carrier, with its expansion strategy built around strengthening its existing network while gradually entering new international markets.