Airfares to Rise as Fuel Costs Surge, Airlines Add Surcharge: Equirus Capital

• Geopolitical tensions in West Asia drive crude oil prices up, raising concerns for the aviation sector.
• Aviation turbine fuel (ATF) costs now constitute 70-80% of airline expenses, up from 30-40%, leading to fuel surcharges.
• Rising fuel prices are expected to impact airline profitability, passenger traffic, and cargo traffic.
• India has not yet seen significant airfare hikes, but more surcharges are anticipated soon.
• Government intervention like excise duty cuts and UDAN scheme may offer some relief, but state-level VAT on ATF remains a challenge.