IndiGo Implements Fuel Charge to Offset Rising ATF Prices, Shares Rise 4%

6 Oct 2023 , 03:13 PM

Interglobe Aviation Limited (IndiGo) shares surged by 4% to Rs 2,569 in early trade on October 6. The budget carrier announced a fuel charge on domestic and international routes starting from October 6 to offset rising ATF (aviation turbine fuel) prices. ATF prices have seen consecutive monthly hikes in the past three months, prompting the move by India’s largest airline.

The government increased jet fuel prices by 5% on October 1, marking the fourth consecutive monthly increase since July. High ATF costs significantly impact airline operational expenses, often necessitating fare adjustments. In the past six months, IndiGo’s stock has gained nearly 30%.

Q1 operating performance was affected by high fuel costs, with revenue per available seat kilometre (ASK) at Rs 5.12 and cost per ASK at Rs 4.17. The yield per passenger dropped from Rs 5.24 to Rs 5.18 in the same quarter. IndiGo’s debt increased by 18% YoY to Rs 46,292 crore, while total cash rose by 43.7% to Rs 27,400 crore.

IndiGo CEO Pieter Elbers highlighted the correlation between crude oil prices and ticket prices, suggesting that ticket prices should cover rising crude oil costs.

Passengers booking IndiGo flights will pay a fuel charge based on the distance traveled:

•   0-500 km: Rs 300
•   501-1,000 km: Rs 400
•   1,001-1,500 km: Rs 550
•   1,501-2,500 km: Rs 650
•   2,501-3,500 km: Rs 800
•   3,501 km and above: Rs 1,000

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