Indian airlines are facing renewed pressure on profitability as escalating tensions in the Middle East threaten to push global crude oil prices to USD 100 per barrel, according to a report by Nuvama. The ongoing geopolitical rift, particularly the Israel-Iran standoff, is raising fears of a potential closure of the Strait of Hormuz — a critical global oil supply route that accounts for around 15 per cent of total oil shipments. Even the perceived 30 per cent risk of closure has already nudged oil prices closer to USD 85 per barrel, and any further escalation could push it to the USD 100 mark.
For Indian carriers, which typically operate on razor-thin margins, this development is particularly alarming. The report highlights that IndiGo, India’s largest airline by market share, has historically struggled to transfer the burden of rising fuel costs to passengers. During past oil price surges, IndiGo’s EBITDAR margins have noticeably declined. According to Nuvama’s sensitivity analysis, a USD 10 per barrel increase in oil prices could lead to a 17 per cent drop in IndiGo’s estimated FY26 EBITDAR.
In addition to rising fuel costs, Indian airlines are also grappling with ongoing airspace restrictions between India and Pakistan. Since late April, both countries have limited access to each other’s airspace. These limitations are disproportionately affecting Indian carriers, while foreign airlines continue to operate without rerouting, giving them a clear advantage in terms of efficiency and cost. This comes at a time when Indian airlines have been steadily gaining market share from foreign operators, further compounding the challenges they face.
The dual impact of rising crude prices and regional airspace restrictions may weigh heavily on the future profitability and expansion plans of Indian airlines. As geopolitical instability continues, the path ahead for domestic carriers looks increasingly turbulent.
(From ANI)
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