Aviation companies are particularly vulnerable to geopolitical shocks due to their high exposure to crude oil prices and jet fuel spreads. The recent surge in crude, combined with sharply widening aviation turbine fuel margins, has intensified worries about cost structures across the sector.
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Kotak upgraded the stock to buy
Emkay Global retained buy
The sharp decline reflects investor concerns over rising fuel costs, widespread flight disruptions, and uncertainty around international airspace availability, all of which could pressure airline profitability in the near term.
Aviation companies are particularly vulnerable to geopolitical shocks due to their high exposure to crude oil prices and jet fuel spreads. The recent surge in crude, combined with sharply widening aviation turbine fuel margins, has intensified worries about cost structures across the sector.
Kotak Institutional Equities upgrades stock, flags industry stress
Despite the steep fall, Kotak Institutional Equities upgraded InterGlobe Aviation to buy and set a target price of ₹5,500, indicating confidence in the airline’s relative strength within the sector.
The brokerage cautioned that airlines’ significant exposure to volatile crude prices and jet fuel spreads limits the ability to accurately forecast cost structures and assess near-term demand elasticity. However, it emphasised that investors should focus more on the rapidly mounting losses of IndiGo’s competitors.
Kotak noted that aggregate investments across rival airlines remain substantial and would require profitability exceeding IndiGo’s peak post-covid pre-tax operational performance to generate even high single-digit post-tax returns. This, the brokerage believes, strengthens IndiGo’s competitive positioning.
It added that aviation is better understood as a consumer spending proxy, where passengers eventually absorb inflationary pressures over time. Airlines, in turn, tend to benefit during periods of cost deflation, supporting earnings recovery cycles.
Emkay Global highlights operational disruption but retains positive stance
Emkay Global Financial Services said the ongoing US–Israel conflict with Iran has led to large-scale airspace restrictions across the Middle East, resulting in widespread flight cancellations and rerouting. The disruption has been aggravated by the continued closure of Pakistan’s airspace.
IndiGo’s international network has been significantly affected, with roughly 30 per cent of its capacity tied to overseas routes and nearly 45 percent of that exposure linked to Middle Eastern airspace. The airline reported cancelling more than 500 flights to Middle Eastern and select long-haul destinations — including Istanbul, Athens, Manchester, and Amsterdam — between February 28 and March 3 due to airspace restrictions. With tensions persisting, cancellations have been extended through early March, with approximately 130 to 140 flights being cancelled daily.
Emkay also flagged the risk of crude supply disruptions following the closure of the Strait of Hormuz, a critical global energy corridor. The brokerage noted that jet fuel cracks have more than doubled to around $40–50 per barrel, with certain spot benchmarks briefly touching $80 per barrel. If elevated fuel trends continue, aviation turbine fuel prices in April 2026 could rise by more than 40 per cent, although the degree of pass-through by oil marketing companies remains uncertain.
Despite near-term uncertainties, Emkay believes the strategic importance of Middle Eastern energy routes could hasten diplomatic resolution. It also highlighted that IndiGo’s operating performance in January and February 2026 remained broadly in line with, or slightly ahead of, guidance and estimates.
The brokerage maintained its buy rating on the stock with a December 2027 target price of ₹6,300, expressing confidence that operations could normalise swiftly once geopolitical tensions ease. It added that estimates and target multiples would be reassessed closer to the fiscal year-end after incorporating management guidance for the next financial year.
Outlook hinges on fuel trajectory and geopolitical developments
Market experts say investor sentiment toward aviation stocks is likely to remain sensitive to crude oil movements and developments in West Asia. While near-term volatility may persist, IndiGo’s dominant domestic market share, comparatively stronger balance sheet, and competitive cost structure continue to support its long-term investment case.
Brokerages broadly agree that once fuel prices stabilise and airspace restrictions ease, IndiGo stands to recover faster than most global and domestic peers, positioning the airline favorably for the next upcycle in air travel demand.
Published on March 9, 2026