IndiGo earnings estimates take a sharp knock as analysts price in higher costs, slower capacity growth

IndiGo

Trade

• Watchlist
• Portfolio
• Message
• Set Alert

 

 

Choose Stock Exchange: BSE LIVE NSE LIVE

26 Aug, 2025 12:21

Volume

Todays L/H

More

×

India’s biggest airline is facing its steepest round of earnings cuts since the pandemic as analysts slash forecasts to reflect the financial fallout from operational disruptions, new pilot-duty rules and a worsening cost environment. Brokerages expect IndiGo’s industry-leading margins to narrow and its capacity expansion to slow sharply, even as they stress that the carrier’s long-term dominance remains intact.

The stock price of InterGlobe Aviation, the company that operates IndiGo airline, was trading flat at 10:30 am at Rs 4928, after a steep 17% erosion since the disruption erupted on November 27 and 21% from its peak of Rs 6225 on August 18, 2025.

Jefferies flagged the new Flight Duty Time Limitations (FDTL) regime as a structural drag on IndiGo’s cost base, saying the rule change hit the airline hardest because of its lean, tightly optimised network. The firm expects near-term earnings pressure from disrupted schedules, higher crew requirements, INR weakness and rising non-fuel costs. Jefferies sees FY2026 EPS falling 18% versus prior expectations and models higher staff costs and weaker utilisation in the coming quarters.

IIFL issued the most severe downgrade, cutting FY26 earnings by 64%, citing rupee depreciation, elevated jet-kero spreads and the cascading impact of inadequate preparedness for the FDTL transition. The brokerage warned of “structural increase in costs” and said IndiGo could also face medium-term regulatory resistance to its market dominance. It now forecasts employee cost per ASK (average seat kilometre) rising from ₹0.47 in FY25 to ₹0.55 by FY27 and sees additional risks from potential caps on market share. FY27 and FY28 EPS estimates were cut 12–14%.

Kotak Institutional Equities drew parallels to Southwest Airlines’ 2022 meltdown, arguing that the combination of a forced operational reset, higher penalties and weaker schedule reliability will push IndiGo’s costs structurally higher. Kotak cut FY2026 EPS by 26% and expects ASK growth to moderate as the airline eases utilisation and rebuilds buffers into its crew rosters. The brokerage also trimmed FY2027–28 earnings by 8%, factoring in 3% lower ASKs and a 5% profitability hit from beefing up pilot strength, technology, training and compliance systems beyond FDTL needs. It also warned that penalties linked to the cancellation episode could amplify the earnings drag.

Across coverage, analysts emphasise that IndiGo will retain its strategic edge, thanks to a consolidated industry, ongoing supply constraints and its unmatched fleet pipeline. But they also caution that part of the airline’s structural cost advantage—central to its dominance—may erode as it hires aggressively, reduces utilisation and faces tighter regulatory scrutiny.

While normal operations are expected to stabilise by mid-December, brokerages now see FY26 as a reset year with thinner margins, a weaker rupee-linked cost base and only a gradual recovery in profitability.