InterGlobe Aviation Limited aircraft IndiGo lands in Mumbai, India on June 20, 2023.
Indranil Aditya | Null Photo | Getty Images
Shares in India’s largest airline IndiGo rose more than 11% as a cease-fire between the United States and Iran announced on Wednesday is likely to ease the strain on the country’s aviation industry, but later pared some gains.
In a temporary relief, the U.S. and Iran agreed to a ceasefire earlier in the day, and Tehran, in coordination with its military, said safe navigation for ships was “possible” for the next two weeks.
The Middle East conflict has affected the Arabian Peninsula and Iran (a major route for westbound flights from India), forcing IndiGo and Air India to operate longer and more expensive routes.
Tata Group’s Air India, whose chief executive officer and managing director Campbell Wilson resigned on Tuesday, increased fuel surcharges on domestic and international flights in response to soaring jet fuel prices. singapore airlinesowns more than 25% of the Indian airline’s shares, and the stock price rose nearly 3%.
In a statement, the company cited a 100% month-on-month increase in jet fuel costs as the main reason for the decision.
“India’s civil aviation sector is currently weathering a severe operational and financial situation stemming from the conflicts in West Asia,” Asamba Chuba Ao, joint secretary of the Ministry of Civil Aviation, said at a press conference on Tuesday.
He added that Indian airline services to the Gulf region have been severely affected, with over 10,000 flights canceled in just over a month.
Indian airlines usually operate up to 350 flights a day to Middle Eastern countries, but that number has come down to 80-90 flights a day, he said.
IndiGo has nearly 65% of India’s aviation market share, while Air India is in second place with about 27%, according to data from the country’s aviation regulator.
On March 18, Moody’s-backed Indian ratings agency ICRA placed IndiGo’s long-term credit rating on “Watch with Negative Impact” citing “expected pressures on the airline’s operating and financial performance due to escalating geopolitical conflicts in West Asia.”
Indigo shares rose more than 8% in recent trading.
