What IndiGo customers can expect: Higher fares, more global routes

IndiGo, the country’s largest airline with a 62 per cent market share, reported its second-quarter fiscal year 2024-25 (Q2 FY25) results late last week.

While the numbers present a mix of growth and rising challenges for the airline, what they tell passengers is that if are hoping for affordable fares during the festival season, they should reconsider their budgets.

Takeaways for passengers

Industry-wide airfare trackers show that 30-day forward fares (refers to the average ticket prices for flights booked for travel dates well in advance and in this case, 30 days ahead) for IndiGo are up by 16 per cent over the same quarter the previous fiscal, while 15-day fares (average fares within the next 15 days) surged by 35 per cent.

This trend suggests IndiGo ticket costs will only go up further in the coming months.

While passengers can look forward to new international routes and expanded cargo operations, the higher ticket prices may be a given. With escalating fuel costs, grounded aircraft, and fierce competition, fare hikes are becoming unavoidable.

Also Read: IndiGo, SpiceJet’s profits amid challenges reflect industry resilience

Reports net loss

Flying into the red after seven quarters, IndiGo posted a net loss of Rs 986.7 crore in the September quarter on headwinds from grounding of planes and higher fuel costs. Excluding the impact of foreign exchange, its Q2 FY25 loss stood at Rs 746.1 crore, said a company release.

"For the quarter, our passenger ticket revenues were Rs 143,592 million, an increase of 9.9 per cent and ancillary revenues were Rs 18,750 million, an increase of 20.9 per cent compared to the same period last year," the release said.

In Q2 FY25, IndiGo introduced two new international routes, with three more planned by year-end. It aims to dedicate 30 per cent of its capacity to international operations by FY25, offering more choices to overseas passengers. This expansion aligns with IndiGo’s strategy to diversify beyond the increasingly competitive domestic market and tap into high-yield global routes.

Operational challenges

A key challenge for IndiGo has been grounding over 60 aircraft due to engine issues with Pratt & Whitney. Its ability to meet growing demand is constrained with fewer operational planes.

IndiGo expects to reduce the number of grounded aircraft to the mid-40s by FY26, but for now, this operational bottleneck limits capacity and contributes to higher fares.

At the same time, fuel expenses continue to rise. Though global crude prices have stabilised, increased VAT on aviation turbine fuel (ATF) in several Indian states and higher oil marketing charges have inflated operating costs.

As a result, IndiGo’s cost per available seat kilometre (CASK), which measures an airline’s operating costs relative to the capacity it provides and helps assess how efficiently an airline manages its costs to operate flights, rose 12 per cent YoY to ₹4.68 per km. Fuel expenses alone account for ₹1.75 per km, which hit IndiGo’s profitability, contributing to an EBITDA decline of 26 per cent YoY to ₹1,620 crore.

Revenue growth

Despite these challenges, IndiGo's revenues grew by 13.6 per cent YoY to ₹16,970 crore, supported by ancillary services like cargo and higher passenger traffic.

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IndiGo’s growing focus on international markets reflects a strategic pivot. With increased competition in India’s domestic market, the airline is turning to global expansion to sustain growth.

By FY25, IndiGo aims for 30 per cent of its total capacity to come from international routes, a strategy designed to benefit from higher yields and less price-sensitive passengers abroad. This shift aligns with global trends, as airlines worldwide focus on long-haul routes to escape domestic market saturation.

IndiGo is also expanding its cargo operations, tapping into a stable income source as passenger travel remains subject to seasonal fluctuations. Additionally, the airline has announced a ₹300-crore investment in IndiGo Ventures Fund-I, which will target startups in aviation-related sectors. This venture demonstrates IndiGo’s intent to innovate and diversify for long-term resilience.

Market competition

IndiGo’s domestic performance has been under pressure, with competition intensifying from new entrants and legacy carriers. As a result, the passenger load factor (PLF), which represents the percentage of available seats (capacity) that are filled with paying passengers, dropped to 82.7 per cent this quarter from 83.3 per cent a year earlier. However, the airline expects demand to recover naturally in Q3 FY25, driven by festive season bookings and a general uptick in travel.

Management remains optimistic about meeting its growth targets. Available seat kilometres (ASK) are set to increase by double digits in the third quarter. Ancillary revenues from cargo and other non-ticket services are also expected to grow, further cushioning the airline’s financials.

Also Read: IndiGo's June quarter profit slumps 12 pc to Rs 2,729 cr on higher costs

IndiGo’s financial results mirror the broader challenges facing the aviation sector. Airlines globally grapple with high fuel costs, currency volatility, and supply chain disruptions, including aircraft engine shortages. The grounding of aircraft is not unique to IndiGo, as carriers worldwide face similar issues with suppliers like Pratt & Whitney.

IndiGo’s total debt of ₹59,200 crore underscores the financial strain of running a capital-intensive airline. Careful debt management will be crucial as the airline moves forward with its ambitious capacity-doubling plan. Yet, IndiGo remains confident that its focus on international expansion, partnerships, and cargo operations will provide sustainable growth.

Future of flying

IndiGo is also beginning to explore sustainable aviation fuel and other green initiatives, though these efforts are in the early stages. As environmental concerns take centre stage globally, IndiGo must align with sustainability goals to stay competitive. The airline’s digital transformation and technology investments will further enhance operational efficiency and improve the passenger experience.

For passengers, the next few quarters will bring more travel choices but higher fares. While IndiGo’s new international routes promise better connectivity, ticket prices will likely remain elevated in the near term, driven by rising operational costs and constrained capacity. Travelers can also expect enhanced cargo services and expanded loyalty programs as the airline aims to retain customer loyalty.

IndiGo’s strategic pivot to international expansion reflects both ambition and necessity. As domestic competition intensifies and fuel prices remain volatile, the airline’s ability to execute its growth plans will be crucial. IndiGo’s future success will depend on how well it balances expansion with cost control, addresses operational challenges, and adapts to evolving market conditions.

Ultimately, IndiGo’s evolving strategy mirrors the aviation industry’s larger transformation, as airlines seek to navigate rising costs, shifting demand, and environmental pressures. Passengers will need to prepare for higher fares but will also benefit from improved connectivity and more travel options. Whether IndiGo can successfully manage this balancing act will determine how smoothly it can take flight in the post-pandemic era.