Why flights in India are unlikely to become cheaper
What's the story
Airfares in India and the Asia-Pacific region are likely to remain high, even with a decline in jet fuel prices. The trend is mainly due to strong passenger demand, which gives airlines the flexibility to maintain higher ticket prices, according to a report by S&P Global Ratings. The agency noted that airlines may be slow to reduce fares as travelers have been relatively responsive to increased ticket costs.
Market dynamics
Slight decline in demand
S&P Global Ratings observed that passenger yields in the Asia-Pacific region increased by about 10-15% year-on-year until June 2026.
Even with the fare hikes, passenger demand only fell by 1-2% year-on-year in May and June.
The agency noted that this slight decline could also be attributed to airlines cutting capacity during this period.
Fuel impact
Stable load factors
Load factors, which indicate the percentage of available seats filled, have remained stable. This suggests that higher fares haven't drastically affected demand.
The trend comes after a spike in jet fuel prices, which crossed $240 a barrel by end-March 2026 due to supply disruptions from the Middle East conflict.
Although prices have since eased, S&P expects geopolitical uncertainty to keep fuel costs high for the rest of this year.
Financial outlook
Anticipated improvements in airline margins
S&P Global Ratings anticipates airline margins to improve significantly from Q4 as seasonal demand picks up.
The agency expects Brent crude prices to drop to $80 a barrel in 2027, down from an assumed $110 a barrel in 2026.
Low-cost airlines could be more vulnerable to high fuel costs, with fuel making up nearly 40% of their costs versus about 33% for full-service carriers.