SpiceJet hiked its ticket prices; Indigo and others might follow suit

• The share price of the Indian aviation companies like Indigo, Jet Airways and others dropped on Thursday afternoon.
• Alongside the spike in aviation turbine fuel (ATF) prices, SpiceJet announced its decision to increase its fare by up to 15%.
• SpiceJet CEO noted that the ATF cost has increased as much as 120 percent since June 2021

The share price of the Indian aviation companies like Indigo, Jet Airways and others dropped on Thursday afternoon, after the aviation turbine fuel (ATF) prices were hiked to a record high of 16%.

Alongside the spike in aviation turbine fuel prices, SpiceJet announced its decision to increase its fare by up to 15%. The low-cost carrier made this decision to counter the soaring fuel prices and the depreciation rupee against the US dollar.

“The sharp increase in ATF prices and the depreciation of the rupee have left the domestic airlines with no choice but to immediately raise airfares. A minimum 10-15 per cent increase in air fares is required to ensure that cost of operations are better sustained," Ajay Singh, the chairperson and managing director of SpiceJet, said.

Singh also noted that the ATF cost has increased as much as 120 percent since June 2021 and urged the government of India to reduce taxes on jet fuels. ATF prices are linked to global crude oil prices, which have been increasing ever since the Russia-Ukraine war.
Source: Media reports

The ministry of civil aviation should consider increasing the upper limits on domestic airfares as the rising fuel prices has become a "real problem", IndiGo CEO Ronojoy Dutta said earlier this month.

Price rise may be on its way

Notably, there may be more price rises in the coming days as airlines look to maintain their margins. The airfares have already increased in 2022 as domestic travelers are paying 60% more than they did last year, on popular routes.

“In this scenario, a rise in jet fuel prices is definitely going to hit the operational cost and profit margins of the airlines. However, airlines may find it difficult to pass the cost to passengers due to price sensitive sentiments in India. If that happen so, an impact on the demand could be clearly seen," Ravi Singh, VP and Head of Research at Share India Securities, added.

He also noted the aviation industry has reported huge losses over the last few quarters due to the Covid-19 pandemic and was still in the recovery phase. The rise in price of ATF — which accounts for 30-40% of the cost of running an airline in India — will impact their profit margins.

Investors are pulling out money

The share price of Jet Airways, IndiGo and SpiceJet decreased in a range of 2% to 7% after the announcement was made. Even the share price of private helicopter company Global Vectra Helicorp dipped 5% today.
Source: Bombay Stock Exchange

The shares of SpiceJet were trading at ₹41. Meanwhile, IndiGo shares were at ₹1,648, Jet Airways shares were at ₹100.5 and Global Vectra Helicorp’s shares were at ₹43.6 at the same time. There are six airlines in India — SpiceJet, IndiGo, Air India, Vistara, Go Airlines and Jet Airways — and three of them are not listed on the stock market yet.

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