Air space closure, high oil price: How to trade IndiGo, SpiceJet shares?

Nuvama on IndiGo, SpiceJet: Domestic brokerage Nuvama has maintained its 'Hold' rating on IndiGo and SpiceJet, citing heightened geopolitical risks amid the escalating Israel-Iran conflict and elevated stock valuations, despite strong growth in scheduled flights for Q1FY26E.
On the bourses, around 1:00 PM, SpiceJet shares were trading 5.13 per cent lower at ₹39.99 per share, while IndiGo shares were trading 0.28 per cent lower at ₹5,257.95 apiece. In comparison, BSE Sensex was trading flat with a negative bias at 81,415.18 levels.
In the past one month, SpiceJet shares have tanked over 11 per cent, while IndiGo shares have plunged over 5 per cent.
The brokerage flagged key concerns, notably the potential impact of Israel-Iran tensions on global oil prices.
A possible closure of the Strait of Hormuz—through which about 15 per cent of global oil supply passes—could spike crude prices to $100 per bbl.
'Even if the market sees only a 30 per cent risk of closure, that can still be enough to fuel prices towards $85 per bbl in the near-term,' said Jal Irani, Tanay Kotecha, Akshay Mane, analysts at Nuvama, in a note dated June 18.
Historically, IndiGo has struggled to fully pass on rising fuel costs, with earnings before interest, taxes, depreciation, amortisation, and rent (or restructuring) (Ebitdar) margins falling during sustained fuel price increases.
Nuvama estimated that every $10 per bbl rise in oil prices could dent IndiGo's FY26E Ebitdar by 17 per cent, though a partial pass-through remains possible.
Adding to the pressure is the ongoing airspace restriction between India and Pakistan since end-April, Nuvama said. While the direct Ebitdar impact on IndiGo is pegged at 1–3 per cent for FY26E, Nuvama warns of a higher strategic cost.
The limitation, analysts said, may disrupt IndiGo's targeted 30 per cent annual growth in international passenger traffic, which is critical to its goal of raising the international ASKM mix to 40 per cent by 2030 from the current approximately 30 per cent.
A ray of hope
Despite these headwinds, operational metrics remain healthy. Total scheduled flights for Q1FY26E are estimated at about 346,000, implying a Y-o-Y growth of 11 per cent, driven by an 8 per cent rise in domestic and a strong 27 per cent increase in international flights. IndiGo is projected to grow in line with the industry—scheduled flights up 11 per cent Y-o-Y, with domestic flights rising 9 per cent and international flights by nearly one-third. The airline's domestic market share is expected to hover around 64 per cent, as reported in April 2025.
In April 2025, industry Available Seat Kilometres (ASKM) rose 11 per cent Y-o-Y, slightly outpacing passenger (PAX) growth of 10 per cent, which led to a 67 basis points (bps) Y-o-Y dip in the industry's Passenger Load Factor (PLF).
IndiGo, however, outperformed peers with a 16 per cent Y-o-Y increase in PAX, a passenger load factor (PLF) of 87 per cent versus the industry average of 86 per cent, and a 14 per cent Y-o-Y ASKM growth versus the sector's 11 per cent. IndiGo's domestic market share rose 338 bps Y-o-Y to 64 per cent, supported by stronger PLF and capacity gains.
Given these mixed signals—solid operational performance offset by geopolitical and cost challenges—Nuvama has maintained a cautious stance and retained its 'Hold' recommendation on both carriers.

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