Asia-Pacific airlines likely to hold fares high despite easing fuel prices: S&P
S&P says Asia-Pacific airlines, including Indian carriers, may keep fares high as demand stays resilient despite easing jet fuel prices.
Asia-Pacific airlines, including those in India, are likely to keep airfares elevated even as jet fuel prices ease, according to S&P Global Ratings. The agency said resilient passenger demand gives carriers room to recover higher operating costs.
"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 said in a sector report.
Carriers in the region had raised ticket prices to offset a sharp increase in fuel costs. S&P estimated that passenger yields — revenue earned per passenger — rose about 10-15 per cent year-on-year as of June 2026.
Despite higher fares, travel demand has shown limited impact. Total passenger traffic in Asia-Pacific contracted just 1-2 per cent year-on-year in May and June, with part of the decline attributed to capacity reductions. Load factors have remained relatively stable.
Jet fuel prices had surged above USD 240 per barrel by end-March 2026 following Middle East conflict disruptions. While prices have eased over the past two months, S&P noted the geopolitical situation remains volatile and fuel costs could stay elevated through the rest of the year.
The agency expects airline margins to recover more meaningfully from the fourth quarter onwards, helped by seasonal peak demand. It assumes Brent crude will decline to USD 80 per barrel in 2027 from USD 110 per barrel in 2026.
Low-cost carriers are likely to face greater pressure from expensive fuel, as fuel accounts for nearly 40 per cent of their costs versus about 33 per cent for full-service airlines. Among airlines reporting June quarter results, 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 economic growth in China and India.