IndiGo, SpiceJet go into a Tailspin as Airlines Send out SOS Over Boiling ATF Prices

Mumbai, April 29:Shares of InterGlobe Aviation slipped over 2% on Wednesday, while SpiceJet edged lower, extending recent weakness as India’s aviation sector grapples with a deepening fuel cost crisis that has triggered warnings of potential operational shutdowns.

InterGlobe Aviation, which owns IndiGo, closed at Rs 4,345.20 while SpiceJet ended at Rs 13.97.

Shares of IndiGo have been on a slide over the past few sessions as rising oil prices squeeze profitability for the airline. Source: NSE

The pressure on airline stocks comes amid a sharp surge in aviation turbine fuel (ATF) prices, which have climbed in tandem with global crude oil rallying above $110 per barrel. Elevated energy prices—driven by geopolitical tensions in West Asia and supply disruptions—have significantly squeezed margins for carriers already operating on thin profitability buffers.

Mayday, Mayday!

The situation has now escalated beyond margin pressure to a broader industry concern. The Federation of Indian Airlines (FIA), which represents major carriers including IndiGo, SpiceJet and Air India, on Sunday issued an urgent appeal to the government, warning that the sector is under “extreme stress” and could be on the verge of stopping operations if fuel costs remain elevated.

At the core of the crisis is the outsized role of fuel in airline economics. ATF typically accounts for 30–40% of operating costs, but with the recent surge in crude, that share has ballooned significantly, sharply eroding profitability.

Help Sought

Airlines have sought immediate government intervention, including a revision in fuel pricing mechanisms, cuts in taxes such as excise duty, and financial support to stabilise operations. Without relief, carriers have warned of route rationalisation, reduced capacity, or even broader disruptions to services.

The weakness in IndiGo and SpiceJet also reflects growing investor concern that the sector may be entering a prolonged period of stress, rather than a short-term cost spike. Unlike past cycles where airlines could pass on fuel costs through higher ticket prices, regulatory constraints and competitive pressures limit pricing power, making it harder to fully offset rising expenses.

Adding to the strain are operational challenges such as airspace restrictions and currency pressures, which have further increased costs for international operations. The combined effect is a sector facing both cyclical and structural headwinds.

Recent market moves suggest that investors are beginning to price in this risk. Airline stocks have seen repeated bouts of selling over the past few weeks whenever crude prices spike, underlining the sector’s high sensitivity to energy costs.

Bottom line:

The current slide in IndiGo and SpiceJet is not just a reaction to rising oil—it reflects a broader crisis brewing in the aviation sector. With fuel costs surging and margins under intense pressure, the industry’s near-term outlook hinges on government intervention and a cooling in crude prices. Until then, aviation stocks may remain under a cloud, with downside risks outweighing near-term triggers for recovery.

Source:

• https://www.nseindia.com/get-quote/equity/SPICEJET/SPICEJET-LTD
• https://www.nseindia.com/get-quote/equity/INDIGO/InterGlobe-Aviation-Limited