Air travel could remain expensive for some time as airlines continue to grapple with high jet fuel prices and rising operating costs. IndiGo CEO Willie Walsh has warned that aviation companies are facing a difficult environment, with fuel costs and airspace restrictions adding to the pressure.
Speaking about the challenges facing the aviation sector, Walsh said jet fuel prices were likely to remain elevated in the short term, even though crude oil prices were not at historically high levels. He also called for lower taxes and airport charges, saying these costs were making it harder for airlines to operate in India. Jet fuel, also known as aviation turbine fuel, accounts for around 40 percent of IndiGo's operating costs, making the recent price rise a major concern for the airline.
Walsh said the problem was not just the price of crude oil but the unusually high premium that jet fuel was commanding over crude. He pointed out that crude oil was trading below the levels seen in 2008, when prices touched much higher marks. However, the difference between crude oil and jet fuel prices, known as the crack spread, has increased sharply. According to Walsh, the long-term average crack spread between 2000 and 2025 was around 22 percent, but it is currently close to 65 percent. He attributed the increase to global disruptions in jet fuel refining, noting that European refineries have reduced production while supplies from the Middle East have also been affected.
Apart from fuel prices, high airport charges and taxes are adding to the cost pressures faced by airlines. Walsh said the Indian aviation market could perform better if taxes and airport charges were lowered, pointing out that airport charges increased in the second quarter compared with the first quarter. He also said airlines needed better value from airports and expected them to be more competitive on pricing, particularly because airports effectively operate as monopolies. On discussions with the Indian government over the rising cost pressures, Walsh said the conversations had been constructive and credited the government for taking initiatives to help manage the situation.
The closure of Pakistan's airspace continues to pose challenges for Indian airlines, Walsh said. He added that IndiGo was constantly reviewing its network and managing operations in the best possible way amid geopolitical developments, noting that the airline had also reduced services to Saudi Arabia while prioritizing passenger and crew safety. On the possibility of hedging fuel costs, Walsh said it was a difficult management decision that the airline would carefully assess.
Looking ahead, Walsh spoke about IndiGo's plans for Navi Mumbai airport, saying it represented a significant opportunity for the airline as it looks to expand its long-haul operations. He said the airline had good relations with Adani Airports and would take decisions about its operations at Navi Mumbai in the best interests of the company, while also monitoring renovation needs at Mumbai airport's terminal. Despite current cost pressures, Walsh said IndiGo would continue to operate as a low-cost carrier and focus on managing its expenses while looking at opportunities for future growth.