Airfares in India and Asia-Pacific likely to remain elevated despite easing jet fuel rates

Flight ticket prices in India and across the broader Asia-Pacific region may remain high even as jet fuel rates ease, according to a recent sector report by S&P Global Ratings. The report indicates that resilient passenger demand is providing carriers with the room needed to recover higher operating costs.

S&P noted that airlines are unlikely to reduce fares quickly despite decreasing fuel prices because travel demand has proven to be largely inelastic. Airlines across the region previously raised ticket prices to offset sharp increases in fuel costs. Consequently, passenger yields—a key measure of revenue earned per passenger—increased by approximately 10% to 15% year-on-year as of June 2026.

Data shows that higher fares have had a limited impact on overall travel demand. Total passenger traffic demand in the Asia-Pacific region contracted by just 1% to 2% year-on-year in May and June. Part of this slight decline was also attributed to reductions in airline capacity. Meanwhile, load factors, which indicate the percentage of available seating capacity being filled, have remained relatively stable across the region.

Pricing pressures for airlines intensified after jet fuel prices surged above $240 per barrel by the end of March 2026, driven by disruptions linked to the Middle East conflict. Although prices have eased over the past two months, S&P highlighted that the geopolitical situation remains volatile, and fuel costs could stay elevated through the remainder of the year.

The ratings agency anticipates that airline margins will recover more meaningfully starting from the fourth quarter, supported by seasonal peak demand. S&P's baseline assumptions project that Brent crude prices will decline to $80 per barrel in 2027, down from an estimated $110 per barrel in 2026.

However, the financial impact of expensive fuel varies across business models. Low-cost carriers are expected to face greater pressure because fuel accounts for nearly 40% of their operational costs, compared to approximately 33% for full-service airlines. Among carriers that reported their financial results for the June quarter, low-cost carriers experienced an average year-on-year EBITDA margin decline of about 15%, while full-service carriers saw a decline of about 9%.

Despite near-term cost pressures and elevated ticket prices, S&P expects passenger demand in the Asia-Pacific region to remain robust. This resilience is supported by growing middle-class populations and the broader economic growth trajectories of key markets, including India and China.

"The airline industry operates on very thin margins, making fuel price volatility a critical factor for financial stability. When fuel costs surge, carriers are forced to pass expenses on to consumers to protect their bottom lines. The fact that passenger demand has remained inelastic in markets like India and China demonstrates strong underlying economic momentum. However, low-cost carriers face a tougher path due to their higher fuel cost exposure. Businesses dependent on corporate travel must factor these elevated ticket prices into their operational budgets for the near term." — Dr. Shishir Gupta, Founder & CEO, StartupLanes