Indian Airlines Face Profit Slump Amid Fuel Volatility and Forex Headwinds

Indian domestic carriers are bracing for a challenging fiscal year as a combination of geopolitical tensions and macroeconomic pressures threatens their bottom line. According to a recent report by Crisil, operating profits for the aviation sector are projected to decline by 10-15 per cent due to rising costs and currency depreciation.

The Surge in Aviation Turbine Fuel (ATF) Costs

Fuel remains the single largest expenditure for airlines, typically accounting for 40% of operating expenses. However, during periods of extreme market volatility, this share can escalate to nearly 60%. The ongoing Middle East conflict has been a primary driver of this instability, pushing global ATF prices more than 50% above pre-conflict levels.

While global ATF prices have recently moderated from approximately $145 per barrel down to below $125, they remain significantly higher than the $90 average recorded in the previous fiscal year. Manish Gupta, Deputy Chief Ratings Officer at Crisil Ratings, noted that even with expected moderation, fuel costs will remain elevated compared to last year, keeping a tight grip on airline margins.

Leasing Expenses and Rupee Depreciation

Beyond fuel, two other critical factors are squeezing profitability: rising lease rentals and a weakening rupee. As Indian airlines aggressively expand their fleets to meet growing demand, lease rental expenses are expected to climb by approximately 15%, reaching an estimated Rs 27,000–28,000 crore this fiscal.

The depreciation of the Indian rupee further complicates the financial landscape. Since a vast majority of airline costs—including fuel procurement, aircraft leases, and international maintenance contracts—are denominated in foreign currencies, the weaker rupee directly inflates the cost of doing business. Crisil warns that the combination of moderating profits and rising lease costs could weaken the ability of carriers to service these leases through internal accruals alone.

Global Turbulence and Domestic Outlook

The struggles of Indian carriers are not isolated; they mirror a broader trend in the global aviation industry. The International Air Transport Association (IATA) has also lowered its global profit forecasts for 2026, citing route disruptions in the Gulf region and unexpected jumps in jet fuel prices.

Yurt içinde Crisil, Hindistan havayollarının toplam faaliyet kârının, geçen yıl kaydedilen 19.000 crore Rs seviyesinden bu mali yılda 16.000–17.000 crore Rs seviyesine düşebileceğini tahmin ediyor. Yolcu talebi dirençli ve güçlü kalmaya devam etse de, havayollarının bu artan maliyetleri daha yüksek bilet fiyatları aracılığıyla tüketicilere yansıtma kabiliyeti, kapasite rasyonalizasyonu ve pazar rekabeti nedeniyle sınırlı kalıyor.

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