India’s largest airline, IndiGo, has warned that rising airfares, driven by a sharp increase in operating costs, could hit travel demand, even as the government moves to remove caps on domestic ticket prices, according to PTI.
The airline’s caution comes amid escalating geopolitical tensions in the Middle East, which have pushed up fuel prices and disrupted flight operations due to airspace curbs. The airline has already introduced a fuel surcharge ranging from Rs 425 to Rs 2,300 to offset some of these costs. However, it acknowledged that further fare increases may be unavoidable.
Costs rising, fares likely to follow
IndiGo said there has been a significant escalation in operating costs, particularly due to fuel and foreign exchange pressures, which are expected to remain elevated. All aviation sector stocks are likely to be in focus as a result of the spike in operation costs.
“IndiGo’s international schedule was planned at similar levels to winter, but the deployed scale will, of course, vary based on ongoing circumstances in the Middle East. It should be noted that there is a very material escalation in operating costs, with fuel and forex-related costs expected to continue to increase very substantially, in addition to what is already an escalating cost environment,” an IndiGo spokesperson said, as cited by PTI.
“While we have introduced a fuel surcharge to compensate for some of this cost, this and other fare increases required will have an effect on demand. This is an extremely fluid operating environment which the airline will be closely monitoring and recalibrating its capacity accordingly, both in domestic and international,” the spokesperson added in a quote to PTI.
Airfare caps lifted amid industry pressure
Against this backdrop, the government’s decision to remove the temporary cap on domestic airfares from Monday gives airlines greater flexibility to pass on rising costs to passengers.
The cap, introduced in December 2025 after widespread flight disruptions led to a spike in ticket prices, had limited one-way economy fares to around Rs 18,000 depending on distance. In lifting the restriction, the Civil Aviation Ministry said, “Excessive or unjustified surge in fares during periods of peak demand, disruptions, or exigencies will be viewed seriously,” adding that caps could be reimposed if necessary in public interest, PTI reported.
Industry returns to market-linked pricing
Airlines had been seeking the removal of fare caps, arguing that price controls were constraining revenues at a time when costs, especially aviation turbine fuel, which accounts for about 40% of operating expenses, remain high.
Officials said the move is aimed at restoring market-driven pricing as the sector stabilises, even as carriers continue to deal with volatility caused by fuel prices, insurance costs and operational disruptions.
Indigo share price
Indigo’s share price was up 1.91% during market opening on March 25. The stock has been down 14.39% during the past month, and it has been down 15.49% during the past year.