Gloomy view for IndiGo as profit plunges in a quarter to forget

IndiGo scaled back its near-term growth expectations significantly after its October-December quarter earnings came under pressure from a combination of new labour codes, regulatory action, and severe operational disruptions in December.

India’s largest carrier reported a 78% year-on-year (y-o-y) drop in consolidated profit to ₹549 crore for the third quarter of fiscal year 2026 (FY26), its weakest performance in four years, even as its top management remained positive on normalisation of operations and visible headwinds.

The Q3 slump was driven by exceptional costs of ₹1,546.5 crore stemming from the implementation of the new labour codes, and compensation paid to passengers during a week-long bout of flight cancellations in December.

The disruptions had led the civil aviation regulator to temporarily curb IndiGo’s flight operations in the first week of December, reducing its daily domestic flight departures by 10% to about 2,000 a day.

This curb has led the company to lower its revenue growth target for the current fiscal quarter. It now expects available seat km growth in “single digits”, below the management’s guidance of “high teens” growth outlined at the end of the second quarter.

“This (curtailment) will have an effect on the (March) quarter,” IndiGo’s chief executive officer (CEO) Pieter Elbers said on Thursday during a post-earnings call. “October and November started well and then there were operational disruptions in December. Between 3-5 December, there were 2,500 cancellations and over 300,000 people were impacted.”

Elbers added that operations have since stabilised in January, and are expected to remain stable in February, too. “We continue on our growth path,” he said.

“Effects of the headwinds continue to grow on us,” chief financial officer Gaurav Negi said in a post-earnings interaction. Negi said passenger revenue growth in the March quarter is expected to remain in the “mid to single digits”, as the company comes off a high base, driven by more people flying during the Kumbh Mela last year.

Results meet expectations

Despite the losses, Indigo’s revenue from operations rose 26.5% sequentially and 6.2% from the year-ago period to ₹23,472 crore. In the first nine months of the current fiscal, the airline has seen a 6% rise in revenue to ₹62,523.5 crore. Its revenue totaled ₹80,802.9 crore in the year ended March 2025.

Analysts gave a thumbs-up to the results.

“IndiGo’s numbers are better than expected for the December quarter,” said Gagan Dixit, Aviation analyst at Elara Securities. “There are one-time hits. Overall, there is no long-term impact on its operational metrics.”

Karan Khanna, lead analyst - hotels, real estate, aviation, small & mid caps, Ambit Capital, concurred.

“Results were largely in line with street expectations except for one-offs,” he said. “However, profitability for the (December) quarter was impacted by exceptional items, primarily due to forex losses, adjustments related to the new labour code and operational disruptions experienced in December.”

Khanna further noted that the company has lowered its guidance for Q4 and has not yet provided any indication regarding FY27. “Looking ahead, the fourth quarter is also expected to face pressure from rupee depreciation. As a result, Q4 earnings are unlikely to deliver any positive material surprise versus market expectations,” he added.

Shares of InterGlobe Aviation, which runs IndiGo, ended 1.15% higher on the BSE on Thursday, even as the Sensex ended up 0.49% at 82,307.3 points. The airline announced its earnings after the markets closed.

Stung by exceptional costs

InterGlobe Aviation took a ₹970 crore hit due to the implementation of the new labour codes, which mandates companies to pay more in retirement benefits to employees.

It also paid ₹577.2 crore in compensation for flight cancellations in the first week of December, due to poor planning by the airline to comply with new rules that restricted the number of flights a pilot could fly at night, which came into effect from 1 November.

The airline was further hit by a 17% sequential rise in fuel costs in the December quarter. Fuel typically accounts for a third of total costs of an airline.

The turbulence faced by IndiGo comes at a time when its closest competitor, privately held Air India, too, struggles to turn the tide.

The Tata-owned airline is reportedly seeking a successor to incumbent CEO Campbell Wilson, whose efforts to turn the airline profitable have been challenged due to airspace closures caused by tensions between India and Pakistan.

SpiceJet, the fourth-largest carrier, is the other listed airline, while Akasa Air is also privately owned.