New Delhi [India], August 26 (ANI): Asia-Pacific airlines including those in India may keep airfares elevated even as jet fuel prices ease, as resilient passenger demand gives carriers room to recover higher operating costs, according to an S&P Global Ratings sector report.
“Even as jet fuel prices ease, we believe airlines may not be inclined to reduce fares quickly since demand has proven to be more inelastic,” S&P Global Ratings said in its latest report.
Airlines in the region have raised ticket prices to offset the sharp increase in fuel costs. S&P estimated that passenger yields, a measure of revenue earned per passenger, increased about 10-15 per cent year-on-year as of June 2026.
However, higher fares have so far had only a limited impact on travel demand. Total passenger traffic demand in Asia-Pacific contracted just 1-2 per cent year-on-year in May and June, with part of the decline also attributable to reductions in airline capacity, the report said.
Load factors, which indicate how much of an airline’s available seating capacity is being filled, have also remained relatively stable in the region.
“As such, we believe airlines may keep prices higher to make up for elevated fuel costs,” S&P said, adding that this would support airlines’ financial buffers.
The pricing pressure comes after jet fuel prices surged above USD 240 per barrel by the end of March 2026 following disruptions linked to the Middle East conflict. While prices have eased over the past two months, S&P said the geopolitical situation remains volatile and fuel costs could stay elevated through the rest of the year.
The ratings agency expects airline margins to recover more meaningfully from the fourth quarter onwards, helped by seasonal peak demand. It assumes Brent crude prices will decline to USD 80 per barrel in 2027 from USD 110 per barrel in 2026.
Low-cost carriers are expected to face greater pressure from expensive fuel because fuel accounts for nearly 40 per cent of their costs, compared with around 33 per cent for full-service airlines.
S&P estimated that among airlines that had reported results for the June quarter, the average year-on-year EBITDA margin decline was about 15 per cent for a low-cost carrier, compared with about 9 per cent for full-service carriers.
Despite near-term cost pressures, S&P expects passenger demand in Asia-Pacific to remain resilient, supported by growing middle classes and the economic growth trajectories of China and India. (ANI)
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