MUMBAI: India’s largest carrier, IndiGo, has warned of a potential 5–10 per cent rise in aviation insurance premiums in the next fiscal year, driven by global reinsurance market tightening, inflation, and heightened geopolitical risk following recent incidents like the Air India crash in Ahmedabad .
Fares
While insurance covers only about 1–2 per cent of an airline’s operating costs, any increase is still felt – directly or indirectly – given the thin margins airlines operate on.
In India and the UAE, for instance, insurers routinely allocate about 1–2 per cent of total operating expenses to aviation cover. Globally, insurance is a fixed cost, and combined with depreciation and crew salaries, it makes up a portion of fixed expense, not tied directly to individual flights.
According to industry data, fuel is the single largest cost (20–30 per cent), labour another 30 per cent, while insurance, leasing, and depreciation are lumped under fixed costs, constituting around 10–15 per cent of the total cost base. So even small shifts in insurance rates can erode margins or pressure fares upward.
What it could mean for passengers
If insurance premiums rise by 5–10 per cent, and airlines are unable to absorb the cost through cost efficiencies or ancillary earnings, they may roll some of it into higher fares. Given competition and price sensitivity, even a small uptick could be material.
