Shares of aviation companies were under selling pressure on Thursday, with IndiGo and SpiceJet falling up to 5% intraday, in line with broad-based selling across the market.

The equity benchmarks - Sensex and Nifty 50 - tumbled over 2% each, tracking weak global cues after remarks by Donald Trump, who signalled continued aggressive military action and warned that U.S. strikes on Iran would persist for the next few weeks, raising fears of further escalation rather than de-escalation.

Rising fuel prices weigh on sentiment

InterGlobe Aviation, the parent of IndiGo, dropped as much as 5% to ₹3,970.05 on the BSE, with its market capitalisation (m-cap) slipping to ₹1.55 lakh crore. On Wednesday, IndiGo shares rallied as much as 10% after it appointed former British Airways chief Willie Walsh as its new CEO, who is expected to take charge by August 3, subject to requisite approvals.

Similarly, SpiceJet shares fell 4% to ₹9.53, taking its m-cap down to ₹1,477 crore, after a 1.95% rise in the previous session.

Sentiment was impacted by concerns over a sharp rally in global oil prices, with Brent crude climbing above $107 per barrel, as rising fuel costs directly threaten profitability. Investors also priced in the likelihood of higher aviation turbine fuel (ATF) costs, which account for 30–40% of airlines’ total operating expenses in India, eating into margins.

IndiGo hikes fuel surcharge

Effective April 2, IndiGo has raised fuel charges across domestic and international routes amid a sharp spike in aviation turbine fuel (ATF) prices, which have surged over 130% month-on-month, significantly impacting operating costs. For domestic operations, the government has allowed only a 25% staggered pass-through of the increase, limiting the immediate impact on ticket prices, with revised fuel charges ranging from ₹275 for routes up to 500 km to ₹950 for routes above 2,000 km.

According to Emkay Global Financial Services, IndiGo has announced a fuel surcharge revision, with domestic charges broadly in line with the March 14 revision, ranging between ₹275 and ₹950 depending on distance. However, international fuel surcharges have been increased significantly, particularly on long-haul routes such as South Asia–Europe, where charges now range between ₹900 and ₹10,000.

Emkay estimates a 20% increase in base fares

Based on IndiGo’s average stage length, the brokerage estimates a 20% increase in base fares (revenue per available seat kilometre), compared with a steeper 50% rise in blended fuel costs. Despite this, pre-tax margins are expected to improve from pre-conflict levels, which could help offset a potential slowdown in passenger volumes and revenue passenger kilometres (RPK), especially given that 13–14% of capacity is exposed to the conflict-affected Gulf region.

The domestic brokerage also highlighted the appointment of aviation veteran Willie Walsh as CEO effective August 2026 as a key positive. Walsh, currently Director General of the International Air Transport Association and former CEO of British Airways and International Airlines Group, brings extensive global experience that is expected to support IndiGo’s international expansion strategy.

Despite near-term uncertainties, the brokerage has reiterated a “Buy” rating, citing IndiGo’s dominant market position and its track record of emerging stronger from past crises such as Covid-19 and the Russia-Ukraine conflict.

However, amid ongoing macro volatility, Emkay has cut its FY26/FY27/FY28 earnings estimates by 13%, 28%, and 7%, respectively, and lowered its target price by 13% to ₹5,500 (from ₹6,300).

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