An aircraft of InterGlobe Aviation Limited, IndiGo is landing in Mumbai, India, on June 20th, 2023.
Indranil Aditya | Nurphoto | Getty Images
Shares of India’s largest airline, IndiGo, rose more than 11%, before paring some gains, as the U.S.-Iran ceasefire announced Wednesday is likely to ease the strain on India’s aviation sector.
In a temporary relief, U.S. and Iran agreed to a ceasefire earlier in the day, with Tehran saying that safe passage of ships was “possible” for the next two weeks in coordination with the country’s armed forces.
The Middle East conflict affected the Arabian Peninsula and Iran — a key route for westbound flights from India — forcing IndiGo and Air India to operate longer, more expensive routes.
Tata Group-owned Air India, whose chief executive and managing director Campbell Wilson resigned on Tuesday, has raised fuel surcharges on domestic and international flights in response to the steep rises in jet fuel prices. Singapore Airlines, which owns over 25% stake in this Indian carrier, saw shares rise nearly 3%.
In a statement, the airline cited a 100% month-on-month surge in jet fuel costs as the key reason behind the decision.
“The Indian civil aviation sector is currently navigating a serious operational and financial situation, triggered by the conflict in West Asia,” Asangba Chuba Ao, joint secretary in the Ministry of Civil Aviation, said at a press conference on Tuesday.
He added that the services of Indian carriers to the Gulf region had been severely affected, with more than 10,000 flights cancelled in just over a month.
Indian airlines typically operate up to 350 flights daily to countries in the Middle East, but that number has fallen to 80–90 flights a day, he said.
IndiGo commands nearly 65% of India’s aviation market share, while Air India is a distant second at about 27%, according to data from the country’s aviation regulator.
On March 18, Moody’s-backed Indian rating agency ICRA had placed IndiGo’s long-term credit rating “on Watch with Negative Implications” owing to the “expected pressure on the airline’s operating and financial performance arising from the escalation of the geopolitical conflict in West Asia.”
IndiGo shares were last trading more than 8% higher.
