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Given the geopolitical tensions in West Asia, ATF prices were set to witness a significant surge from 1st April. In fact, ATF prices in top 4 metros had almost doubled (as compared to March) when the figures were first published in the morning on IOC’s website. Here is the brief pricing trend for the last 2 months:

ATF prices prevailing in March-26:
Delhi – Rs96.6 per litre
Kolkatta – Rs99.5 per litre
Mumbai – Rs90.4 per litre
Chennai – Rs100.2 per litre

ATF prices in April-26 (That prevailed in the morning before government intervened):
Delhi – Rs207.3 per litre
Kolkatta – Rs205.9 per litre
Mumbai – Rs194.9 per litre
Chennai – Rs214.5 per litre

However, the government decided to intervene immediately and has limited the increase in ATF prices to 25% (Rs15 per litre) for domestic routes. For international routes, non-capped rates (the ones that prevailed early morning) will be in place.

The revised ATF prices (capped rates) for April-26 are as follows:
 Delhi – Rs104.9 per litre
 Kolkatta – Rs109.4 per litre
 Mumbai – Rs98.2 per litre
 Chennai – Rs109.8 per litre

Note: You will find that the ATF price hike for top 4 cities is ~9-10% in April-26 when compared to March-26. This does not match with the 25% hike stated by the government. Pertinent to note that the earlier figures reported on IOC’s website were for non-scheduled airlines and ATF rates for scheduled airlines are a bit different. Thus, the effective price hike is indeed 25%.

Our view: Indigo’s domestic/international ASKM mix is 70%/30% respectively. Thus, 70% of the domestic capacity will witness ATF inflation of 25% while 30% of international capacity will witness ATF inflation of 100% odd in April-26. Thus, total ATF inflation for Indigo after government’s intervention stands at 48% odd (25% hike in ATF prices for domestic capacity of 70% + 100% hike in ATF prices for international capacity of 30%). Had it not been for the intervention, the ATF hike would have been 100% odd.

While fuel cost inflation is to the tune of ~48%, Indigo has also levied a fuel surcharge (effective 14th March) which is as follows:-

Domestic India – Rs425
Indian Subcontinent – Rs425
Middle East – Rs900
South East Asia & China – Rs1,800
Africa & West Asia – Rs1,800

Europe – Rs2,300

Let us now try to assess the approximate fare hike to get a sense of fuel cost recovery. For the purpose of our analysis, we just consider domestic operations as it forms ~70% of Indigo’s ASKM mix. In FY25, Indigo’s domestic yield was Rs6.3 (figure for 9MFY26 is not taken as breakdown of domestic & international revenue is not available on quarterly basis). Further, the average stage length (approximate distance covered by the flight after it takes off) for Indigo’s flight is ~1,100 kms implying average ticket price is Rs6,930 (1,100 kms*Rs6.3). Thus, effective price increase for domestic routes is 6% (Rs425/Rs6,930).

However, we believe our price hike figure for domestic routes is understated. The domestic average stage length figure should be lower than 1,100kms (international flights cover longer distance) and thus the price increase in domestic markets could be higher than 6%. Nonetheless, fuel cost inflation is considerably higher which can impact gross spreads in 1QFY27E. We maintain HOLD on the stock with a TP of Rs5,186.  

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