Air India’s Market Share Climbs as IndiGo Slips - Will Rising Fuel Costs Hit Aviation Stock Rally?

India’s aviation industry faced another choppy month in August 2025, with extended monsoons and flooding slowing passenger growth and weighing on investor sentiment. 

According to Emkay Global’s latest sector report, domestic passenger traffic slipped 1% year-on-year (YoY) to 12.9 million, with September trends pointing to a similar slowdown.

IndiGo Dominates, Air India Recovers
IndiGo continued to lead with a 64.2% market share, though the airline lost 100 basis points month-on-month (MoM). Air India Group, however, gained 110 bps, climbing to 27.3% market share—its strongest performance in months. Together, both carriers accounted for nearly 92% of domestic traffic, consolidating the duopoly in the sector.

Emkay report noted that Air India’s operational improvements, including higher load factors and better punctuality, are “encouraging signs for long-term recovery.”

Load Factors and OTP Lift Investor Sentiment
Passenger load factors (PLFs) strengthened in August. Akasa led with 91%, followed by SpiceJet at 87%, IndiGo at 84.6%, and Air India at 81.8%. On-time performance (OTP) also improved—IndiGo topped the chart with 90.6%, while Air India improved to 84.5%.

While weather-related disruptions still caused over 60% of cancellations, analysts said operational resilience could reassure investors wary of cost pressures.

ATF Prices and Stock Market Implications
Fuel costs remained the biggest overhang. Aviation Turbine Fuel (ATF) prices were hiked 3% MoM in October 2025 to ₹93.8/litre in Delhi, despite a 1% fall in crude oil prices. The rise was driven by a 15% surge in jet fuel cracks and a weaker rupee.

“Given the current crude and refining crack trends, we expect ATF prices in November 2025 to remain range-bound,” said Emkay Research analysts Arya Patel and Sabri Hazarika.

For investors, this presents a mixed picture. Higher fuel costs typically weigh on airline profitability and stock performance, but improved load factors and operational efficiency may provide some cushion. Aviation stocks, already volatile in 2025, are expected to remain sensitive to both oil price movements and passenger demand trends.

Market Outlook
Emkay report says IndiGo’s strong market leadership continues to support its valuation, though Air India’s revival story under the Tata Group could attract long-term institutional interest. Smaller carriers like SpiceJet remain under pressure, both operationally and financially.

With the festive season approaching, passenger demand is expected to rebound, but investors will closely watch crude oil trends and ATF pricing to gauge earnings visibility for Q3FY26.

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