InterGlobe Aviation Ltd. may have room to raise airfares further as travellers continue to absorb higher ticket prices, Chief Executive Officer Rahul Bhatia said, signalling that demand has remained resilient despite a rise in fares.
The airline has already increased fares to offset higher operating costs and has not yet seen a meaningful impact on demand, Bhatia said during IndiGo's earnings call with analysts on Friday.
The comments came as airlines grapple with higher fuel costs and disruptions linked to geopolitical tensions in the Middle East. The ability to pass higher costs on to passengers is a key factor for airline profitability because it helps protect margins when expenses rise.
"So for us, it is very clear that we need to take fares up to protect ourselves against sort of these additional costs that are showing up," Bhatia said.
The airline has so far found that passengers continue to book despite higher ticket prices. "For the moment, what we are discovering is that the fares are sticking. The demand is there," Bhatia said.
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Pricing Strategy
Bhatia suggested the airline would continue testing pricing levels until it begins to see demand respond to higher fares.
"You obviously have to take the pricing up to the point where you start to see elasticity come in," he said. "For the moment, what we are seeing is as we take the fares up, the market is inelastic to these hikes and fares."
The remarks indicate that IndiGo believes travellers remain willing to pay higher fares even as ticket prices rise.
Costs Still Rising
The comments came after analysts asked whether fare increases would be constrained by weaker demand.
Chief Financial Officer Gaurav Negi said fuel costs had risen sharply in recent months, prompting the airline to introduce fuel charges to recover part of the increase.
"We did introduce a fuel charge to pass on some of those costs related to the increase that has happened," Negi said.
He added that IndiGo had recovered a large part of the increase in domestic markets and was seeking to pass on a significant portion of higher costs on international routes. However, the airline has not yet fully offset the impact of higher fuel prices.
"We've not been able to completely offset the increased fuel environment that we are in," Negi said.
Demand Holding Up
Despite the higher pricing environment, management said booking trends remain supportive.
Negi said May was stronger than April and that demand conditions had improved as the quarter progressed.
The airline currently expects a mid-teens increase in passenger unit revenue in the first quarter of FY27, supported by pricing and booking trends observed in April and May.
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