Why IndiGo Stock Is Gaining After Big Announcement

Shares of InterGlobe Aviation, the parent of airline IndiGo, gained on Friday after the airline said it would add a fuel charge to bookings as jet fuel costs rise.

What Happened: India’s largest domestic carrier said it would implement a fuel charge on both domestic and international routes, effective October 6, as a response to the surging prices of Aviation Turbine Fuel (ATF).

Why It Matters: The decision comes in light of the considerable escalation in ATF prices over the past three months, marked by consecutive monthly hikes. ATF constitutes a significant portion of an airline’s operating expenses, constituting 40% of an airline’s operating costs.

Under this new pricing structure, passengers booking IndiGo flights will incur a fuel charge per sector, determined by the sector’s distance.

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On October 1, the government raised the ATF price by 5%, marking the fourth consecutive monthly increase since July. The national capital witnessed a 5.1% hike, bringing the ATF price to ₹1.18 lakh per kilolitre from ₹1.12 lakh. In total, ATF prices have risen by a remarkable ₹29,391.08 per kilolitre in just four increments.

Continuous price surges have placed additional strain on airlines already grappling with financial challenges.

Price Action: IndiGo’s share price was up 1.59% at ₹2,512.70 at the start of trade on Friday.

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