West Asia war impact: IndiGo shares decline 3% as multiple brokerages flag pressure on airline's earnings

IndiGo shares see profit booking in trade. 

• InterGlobe Aviation shares drop 3% due to West Asia tensions.
• Brokerages warn of earnings pressure due to fuel costs, flight cuts.
• IndiGo cancelled 500+ flights due to US-Iran hostilities.

Did our AI summary help?

Shares of InterGlobe Aviation, the parent of IndiGo, fell over 3 percent intraday on Friday after multiple brokerages flagged potential pressure on the airline’s earnings amid tensions in West Asia.

The decline snapped the previous session’s gains, when the stock had settled nearly 3 percent higher. However, the stock is down 9.5 percent this week.

InterGlobe Aviation shares ended 2.28 percent lower at Rs 4,410 per share after brokerage J.P. Morgan highlighted earnings headwinds from higher fuel costs and a moderation in international air traffic linked to the Middle East crisis.

Global brokerage UBS said the airline’s earnings remain sensitive to the ongoing military action between the United States and Iran. According to the brokerage, the hostilities are likely to weigh on the carrier’s available seat kilometre (ASK) in the near term, NDTV Profit reported, citing UBS.

Available seat kilometre is a measure of passenger carrying capacity calculated by multiplying the number of available seats by the kilometres flown.

UBS retained a ‘buy’ rating on the stock but cut its target price by nearly 13 percent to Rs 5,480 from Rs 6,170. The brokerage said a rise in crude oil prices poses additional risk to the company’s earnings. It also noted that depreciation of the rupee against the US dollar could create medium-term headwinds.

On Wednesday, the airline said it had cancelled more than 500 flights to West Asia and other select international destinations amid the hostilities between the US and Iran.

Earlier, on March 4, the low-cost carrier said it had cancelled over 500 overseas flights between February 28 and March 3 due to the ongoing tensions in the Middle East. On that day, the company’s stock was trading 4.6 percent lower at Rs 4,310.4 per share.

"If these cancellations persist for seven days, we estimate they will erase about Rs 32 crore of IndiGo’s profit before tax, equal to about 6 percent of profit before tax in the fourth quarter," HSBC analysts led by Parash Jain said.

Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.