NEW DELHI: Low-cost Indian airline IndiGo is likely to face near-term pressure on profitability due to rising fuel prices triggered by the escalating West Asia conflict, a report said.
The Moody's Ratings report said that while higher fuel costs will weigh on margins in the short term, IndiGo’s relatively short ticket booking cycle of around 30–45 days should enable it to pass on increased costs to passengers over time.
The report also noted that IndiGo does not hedge fuel prices, making it more vulnerable to sudden spikes in aviation fuel costs.
The recent escalation follows military strikes by Israel and the US on Iran on February 28, which have disrupted air travel across parts of West Asia, pushed up crude oil and jet fuel prices, and forced airlines to take longer routes due to airspace closures.
"Higher jet fuel prices globally will weigh on airline profitability, " the report said, highlighting that fuel is the second-largest expense for airlines after labour.