India's largest airline, IndiGo, is embarking on a detailed review of its fuel hedging policy, a move confirmed by CEO Willie Walsh. The decision stems from a significant surge in aviation turbine fuel (ATF) costs, which are pressing airlines globally.
Walsh, speaking at his first in-person media briefing since taking the helm in August, revealed that the airline's board discussed the issue last week and committed to a comprehensive assessment. Currently, IndiGo does not hedge its fuel purchases, a strategy it is now re-evaluating as it prepares for ambitious long-haul international operations.
Rising Fuel Costs Drive Policy Reassessment
The imperative for this review is clear: the premium on jet fuel over crude oil, known as the crack spread, has skyrocketed to approximately 65%. This figure stands in stark contrast to its historical average of about 22% between 2000 and 2025. Disruptions in global refining capacity, particularly for jet fuel production, are cited as key contributors to these elevated prices.
While major Asian carriers typically hedge around 40% of their fuel requirements, and European airlines often hedge between 70% and 80%, IndiGo has historically avoided the practice. Walsh emphasized that hedging is fundamentally a risk management tool, not a speculative bet on future prices. He also noted that adopting such a strategy could introduce a new competitive risk, given that most other Indian domestic airlines also do not hedge.
International Expansion and Fleet Upgrades
Despite the challenges posed by high fuel costs and geopolitical disruptions, IndiGo remains confident in its long-haul ambitions. The airline anticipates receiving its first Airbus A350 aircraft in the second quarter of 2028, part of an order for 60 of these wide-body jets. The initial 10 A350s will feature a three-class configuration, including 16 flat-bed business class seats, premium economy, and economy. IndiGo is also considering increasing business class seating in subsequent aircraft to meet growing global demand for premium travel.
Currently, IndiGo operates four A321XLR aircraft, a number expected to grow to seven next year. These aircraft are crucial for the airline's expansion into new Asian and select European markets. Walsh also mentioned that while around 30 daily flights were temporarily reduced due to the situation in Saudi Arabia, nearly the entire network has since recovered, with affected services set to resume when safe.
Commitment to Long-Term Growth
IndiGo's CEO reiterated the airline's unwavering commitment to its long-term capacity growth plans, even as it navigates the complexities of elevated fuel costs and a dynamic global aviation landscape. The comprehensive review of its fuel hedging policy is a strategic step to ensure sustainable growth and competitiveness in the international arena.