Crisil flags 10-15% decline in airlines’ operating profit in FY26 due to West Asia conflict

18 Jun 2026 Evaluate

The rating agency Crisil has flagged a 10-15% decline in the operating profit of domestic airlines in this fiscal (FY26), weighed by elevated aviation turbine fuel (ATF) prices, airspace restrictions and rupee depreciation amid the West Asia conflict. It noted that the conflict has led to a sharp average increase of over 50% in global ATF prices versus the pre-conflict levels, significantly raising the airlines’ operating cost as fuel accounts for 40-50% of that cost. Although global ATF prices have begun to ease from around $145 per barrel (week ending June 05, 2026) to below around $125 currently they remain significantly above the average of around $90 last fiscal.

Further, Crisil pointed that the first quarter of this fiscal has borne the brunt of the price spike, overall fuel costs for the full fiscal will remain high despite ease in fuel prices led by a potential resolution of the conflict. However, the government of India’s measure of 25% cap on domestic ATF price increase starting April 01, 2026, has partially cushioned airlines from the immediate post-conflict spike in fuel cost. It highlighted that the cost pressure has been exacerbated by the depreciation in the rupee as majority of the expenses of domestic airlines, including fuel, lease rentals and maintenance costs are paid for in foreign currency.

In order to reduce the cost burden, airlines have introduced a fuel surcharge, which is expected to increase revenue per available seat kilometre (RASK) to Rs 5.2 to 5.4 per km this fiscal, up from Rs 4.9 per km last fiscal. However, Crisil pointed that the pass-through remains partial due to the price-sensitive nature of air travel demand. Besides, airlines are rationalising routes and expected to trim capacity, mainly on international routes impacted by airspace restrictions and longer flying times. While this will support margins, it will moderate growth. Therefore, the combined impact of higher costs, constrained pricing power and capacity rationalisation is expected to reduce the aggregate operating profit of the airlines to Rs 16,000 to 17,000 crore this fiscal from around Rs 19,000 crore last fiscal.

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