IndiGo, SpiceJet shares fall as ATF prices rise for second month
IndiGo and SpiceJet shares came under pressure after ATF prices rose 5.46% for the second consecutive month, raising concerns over airline fuel costs and margins.
ATF Price Hike: IndiGo parent InterGlobe Aviation fell 3.21% to ₹5,066 and SpiceJet declined 1.45% to ₹10.17 on September 1 after Aviation Turbine Fuel (ATF) prices for domestic airlines were raised 5.46%, or ₹6.28 per litre.
ATF Price Hike: Shares of domestic aviation companies came under pressure on Tuesday after ATF prices were increased for the second consecutive month. The latest hike takes jet fuel prices to ₹121.28 per litre from ₹115, adding to the cost burden for airlines.
How did aviation stocks react?
InterGlobe Aviation, the parent company of IndiGo, was trading at ₹5,087.50 on NSE at 9:35 am, down ₹146.50 or 2.80% from the previous close. By 10:25 am, the stock had fallen 3.21% to ₹5,066.
SpiceJet shares were trading at ₹10.23 at 9:35 am, down ₹0.09 or 0.87%. By 10:25 am, the stock had declined 1.45% to ₹10.17.
The stock movements came as the latest fuel-price increase raised concerns over operating costs and airline margins.
What does the ATF price hike mean for airlines?
Fuel accounts for almost 40% of an airline's operating costs, while the source estimates it at roughly 35%-40% for Indian carriers. A sustained increase in ATF prices can therefore put pressure on margins, particularly if airlines cannot fully pass higher costs on to passengers.
Airlines may increase fares to offset some of the additional fuel expense, but ticket prices also depend on passenger demand, competition, available capacity and booking trends. As a result, the entire increase in fuel costs may not necessarily be passed on to customers.
The latest ₹6.28-per-litre increase follows a ₹5-per-litre rise in August. ATF prices had been cut by ₹12,239.17 per kilolitre across three monthly reductions starting April 2025, while subsequent increases of ₹8,949.38 per kilolitre have wiped away almost three-fourths of those gains.
Why are crude oil prices in focus?
ATF increase comes alongside higher global crude oil prices. Renewed US-Iran tensions have raised concerns over potential disruptions to oil supplies from West Asia.
Brent crude futures rose to around $91.05 a barrel, while US West Texas Intermediate (WTI) crude climbed to around $86.59 a barrel. Brent had gained 2.7% in the previous session, while WTI rose 2.8% as markets reacted to renewed military tensions between the US and Iran.
With crude and jet fuel prices moving higher simultaneously, fuel costs are likely to remain an important factor for airline investors.
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How are ATF prices determined?
ATF prices vary across cities depending on local taxes such as VAT. In August, prices stood at ₹86,077.14 per kilolitre in Mumbai, ₹95,512.26 per kilolitre in Chennai and ₹95,164.90 per kilolitre in Kolkata.
Indian Oil Corporation, Bharat Petroleum Corporation and Hindustan Petroleum Corporation revise ATF prices on the first day of every month based on the average price of benchmark international fuel and foreign exchange rates. Domestic petrol and diesel prices remain unchanged.
Conclusion: What does this mean for investors?
The second consecutive ATF increase puts additional focus on airline fuel costs and margins. Investors will be watching airfare trends, passenger demand, competition and the ability of carriers to absorb or pass on higher fuel expenses as crude and jet fuel prices remain elevated.
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