IndiGo soars 4% as fuel charge to offset rising ATF prices kicks in

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October 6, 2023
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In the first quarter, the airline posted a profit of Rs 3,090 crore as compared to a net loss of Rs 1,064 crore in the same period a year ago.

Shares of Interglobe Aviation Limited, which operates IndiGo, were up 4 percent at Rs 2,569 in the early trade on October 6 after the budget carrier announced a fuel charge on domestic and international routes, effective October 6, offset rising ATF prices.

The move comes as the aviation turbine fuel (ATF) price have soared in the last three months with consecutive hikes every month, India’s biggest airline said in a statement on October 5.

On October 1, the government increased jet fuel price by 5 percent, the fourth straight monthly increase since July.

ATF constitutes a significant portion of an airline’s operational expenditures, often requiring fare adjustments to accommodate the impact of increased costs.

In the past six months, the IndiGo stock has gained almost 30 percent.

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In the first quarter, the company’s operating performance was marred by high fuel costs as revenue per available seat kilometre (ASK) stood at Rs 5.12, whereas cost per ASK was at Rs 4.17.

The company’s yield per passenger fell to Rs 5.18 in the quarter from Rs 5.24, the company said. During the quarter, debt rose 18 percent on year to Rs 46,292 crore, while total cash rose by 43.7 percent to Rs 27,400 crore.

Recently, IndiGo CEO Pieter Elbers told CNBC TV-18, “There is a correlation between crude oil and ticket prices. At the end of the day, ticket prices should cover the jump in crude oil prices. We’re reviewing measures for crude prices.”

Passengers booking IndiGo flights will pay a fuel charge, which will be determined by the distance travelled.

For a flights covering distances of 0-500 km, the fuel charge will be Rs 300 and for 501-1,000 km Rs 400. Similarly, Rs 550, Rs 650, Rs 800, and Rs 1,000 fuel charges will apply for distances of 1,001-1,500 km, 1,501-2,500 km, 2,501-3,500 km, and 3,501 km and above, respectively.

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