IndiGo CEO Willie Walsh on Thursday indicated that higher ticket prices were unavoidable after the airline reported a net loss of ₹ 1,879 crore in the September quarter mainly due to pressure from elevated jet fuel prices and the depreciation of the rupee.
Walsh blamed an unusually high premium for jet fuel over crude oil, known as the crack spread, which he believes could persist. What we’ve seen in our industry is the highest crack spread, the premium between crude and jet that we have ever seen. “I’ve been in this industry 47 years..I’ve never seen anything like this and people need to understand it’s not just the impact of an elevated crude price which is impacting everybody. Historically it averages about 21-22%…This year it’s looking like it’s averaged around 65%.”
Walsh said IndiGo would have to consider raising fares further to offset the rise, while trying to limit the impact on passengers. Walsh also said the airline would review its network and capacity as part of its efforts to offset the fuel price surge.
“I think we’ve got to continue as we did in Q2 effectively to balance fares against load factor. As you know our airlines have a number of levers that will focus on yield and focus on loan factor but in effect the critical issue is to focus on the combination of those two to maximize the revenue that we can generate. So we’ll look at all of the options then to us and take whatever action we believe is appropriate as we go through the next quarter and the rest of the year.”
Walsh said the airline would have to balance fares against passenger demand as it decides how much of the cost increase can be passed on to customers.
