The brokerage says the Middle East conflict has created downside risk from softer international traffic and higher fuel prices for travel companies, with airlines the most exposed. It notes that Middle East–linked capacity cuts and longer routings are pushing up costs and fares, even as “high airfares could also dampen load factors.”
On the hotel side, Jefferies warns of a “near-term risk from softer foreign tourist arrivals (FTAs)” and disruption to international traffic–led MICE demand, with any weakness only partly cushioned by domestic substitution.
Portfolio stance: Airports over airlines over hotels
Despite trimming estimates, Jefferies reiterates its pecking order starting with airports, airlines and then hotels, arguing that airport operators like GMR can lean on non-aero revenues and new assets to ride out the Middle East shock, while airlines and hotels face a more direct hit to earnings.
The firm maintains a “BUY” on GMR Airports, IndiGo, Indian Hotels (IHCL), ITC Hotels and Chalet Hotels, but has cut target prices on the airline and all three hotel names to bake in the Iran war impact on traffic, fuel and foreign arrivals.
IndiGo: Deep EPS cuts as fuel, forex and ME routes bite
Jefferies flags IndiGo as the most directly hit stock in its travel coverage, given its heavy Middle East exposure and sensitivity to aviation turbine fuel and currency moves. It estimates that “ME-linked traffic forms ~45% of IndiGo’s int’l capacity (~15–17% of total traffic),” leaving the carrier vulnerable to airspace closures, rerouting and intermittent suspensions.In its 4QFY26 preview, the brokerage pegs IndiGo’s ASK growth at “~4% YoY in 4QFY26 (vs Co’s original guidance at 10% YoY)” and models a ~4% YoY moderation in PRASK, alongside a sharp mark-to-market forex hit. It builds in “~Rs40bn of forex MTM loss for 4Q” and now expects a 4QFY26 PAT loss of about Rs25bn, with ex-forex PAT down 49% year-on-year to Rs15bn.
Even so, the stock remains a core holding: Jefferies keeps its buy rating but trims the target price to Rs5,500 from Rs6,140, valuing IndiGo at “9.5x FY28 EV/EBITDA (implies ~25x FY28 EPS).” It sums up the near-term picture bluntly, noting that Middle East disruptions, “higher fuel, neg forex impact and lower utilisation would hurt RASK-CASK spreads” and imply losses in 1HFY27 despite fare hikes.
GMR Airports: Traffic headwinds but target price intact
On GMR Airports, Jefferies acknowledges clear pressure on international volumes from the Iran–ME conflict but stops short of a rating or target cut, citing tariff hikes, non-aero growth and new projects as offsets. It expects 4QFY26 consolidated EBITDA to grow 51% year-on-year to Rs15.3bn, helped by “new tariff at DIAL (YoY), growth in non-aero spend/pax, operationalisation of Delhi Duty Free and Cargo.”
However, the firm believes the war will weigh on FY27 growth: “We expect pax traffic growth at GMR’s India airports to remain slow at ~7% in FY27 (FY26: 0–1% YoY), driven by weakness in int’l traffic amid the ongoing Middle East conflict.” It highlights that “~13–15% of airport traffic is exposed,” led by Delhi, where 28% of traffic is international and “~25% ME-linked,” and Hyderabad, where 17–18% of traffic is international and “~30% ME-linked.”
Jefferies has trimmed FY27–28 EBITDA estimates by about 2% to reflect softer volumes, but retains its sum-of-the-parts–based target price of Rs125 and a buy stance. It points to the upcoming Bhogapuram (Visakhapatnam) airport, expected to commence operations in 2QFY27, and expanding platform opportunities as factors that “continue to cushion the downside.”
Hotels: FTA drag forces multiple and target price cuts
The brokerage sees the Iran war and wider Middle East tensions primarily transmitting to India’s hotel sector via foreign tourist arrivals and international MICE cancellations. It writes that the industry’s RevPAR growth is set to “moderate to 5–7% in 4Q (vs 12–13% in 3Q) and slip to low single-digit YoY growth in 1Q,” before recovering thereafter. FTAs, which account for “~20–50% of business for IHCL, ITC Hotels, Chalet & Leela,” are described as “higher-spending guests,” implying potential pressure on occupancies and average room rates in gateway markets.
Jefferies notes that this will be “partly cushioned by relatively resilient domestic tourism, corporate travel and select MICE shifting onshore,” with city hotels and drive-to leisure destinations benefiting as high airfares curb long-haul trips and support shorter domestic holidays.
Even so, the firm has moved to de-rate the hotel pack, saying: “We lower FY27–FY28 EBITDA by ~2–8% across hotel peers and cut PTs, reflecting ~10–15% reductions in EV/EBITDA multiples.”
Jefferies has cut Indian Hotels target price to Rs 800 from Rs 900. ITC Hotels’ target was cut to Rs 210 from Rs 250, while Chalet Hotels target price lowered to Rs 910 from Rs 1,075. It has buy calls on the three hotel stocks.
Among travel-tech names, Jefferies flags TBO Tek as particularly exposed to the Iran–ME conflict because of its large Gulf business. It estimates that the Middle East accounts for “~25% of TBO’s Hotel GTV & ~15% of total GTV” and says the ongoing disruption will “hit performance in 4QFY26–1QFY27, given upfront cancellation from travellers” and will delay the margin turnaround management had guided from 4Q.
In 4QFY26, the brokerage still expects strong growth off a soft base, projecting GTV, revenue, EBITDA and PAT growth of “25%/76%/41%/12%,” led by a 32% YoY rise in Hotels GTV (including the Classic acquisition; like-for-like 12%). But it has lowered its outer-year assumptions, saying: “We cut FY26-28 GTV by 2–6%, PAT by 4–20%, and revise PT to Rs1,615 (36x FY28 EPS).”
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)