Fuel cools, but India flights may stay costly

India and the Asia-Pacific region may see soaring airfares even as jet fuel prices start to ease, according to a report by S&P Global Ratings. The agency attributes this to strong passenger demand, which has given airlines leeway to maintain high ticket prices. Passenger yields in the region grew around 10-15% year-on-year through June 2026, with only a 1-2% year-on-year drop in demand in May and June.

The increase in fares, however, hasn't led to a significant drop in demand, as airlines have reduced capacity during the period, keeping load factors stable. This trend followed a sharp rise in jet fuel prices, which surpassed USD 240 a barrel by the end of March 2026 due to supply disruptions caused by the Middle East conflict. Even though fuel costs have since dropped, S&P expects geopolitical uncertainty to keep them high throughout the year.

S&P predicts that airline margins will improve notably from the fourth quarter as seasonal demand picks up. It forecasts Brent crude prices to fall to USD 80 a barrel in 2027, down from around USD 110 a barrel in 2026. Low-cost airlines, which spend nearly 40% on fuel compared to about 33% for full-service carriers, may be more vulnerable to high fuel expenses.

Despite the near-term setbacks, S&P anticipates passenger demand across the Asia-Pacific region to stay resilient, driven by rising middle classes and economic growth in China and India.