Moneycontrol Pro Panorama | IndiGo’s turbulence is a wake-up call for India’s aviation industry

IndiGo has grown aggressively for years, now controlling more than half of India’s domestic market.

When the country’s largest airline, with more than 2,200 daily flights, is forced to cut its schedule by 10 per cent overnight, it signals a deep operational crisis — not a passing glitch. IndiGo’s week-long disruption, triggered by its transition to the second phase of new flight duty time limitation (FDTL) norms, has left lakhs of passengers stranded and exposed glaring cracks in the airline’s internal systems.

The Ministry of Civil Aviation stepped in only after scenes of chaos spilled across airports--long queues, passengers sleeping on terminal floors, missing baggage, and last-minute cancellations. By Tuesday, Civil Aviation Minister Ram Mohan Naidu Kinjarapu made it clear that the government had lost patience. Summoning IndiGo’s CEO Pieter Elbers for the second time in as many days, the minister announced a 10 percent curtailment of IndiGo’s overall schedule, doubling the cut ordered earlier by the DGCA.

This is one of the strongest public interventions against any Indian airline in recent years. The message is unmistakable: operational mismanagement will not be tolerated, no matter how dominant the carrier. But the key question is who will pay the price for this mess, as raised by my colleague Ravi Ananthanarayanan in his piece.

The ministry’s statement was unusually blunt. It said the disruptions were caused not by external shocks, but by IndiGo’s internal mismanagement -- chaotic crew rosters, a flawed transition plan for the new FDTL norms, poor scheduling oversight and inadequate communication with passengers. These are basic building blocks of any airline’s operations. When the country’s largest carrier stumbles on all four, the impact is bound to be nationwide.

IndiGo has maintained that refunds for 100 percent of flights cancelled until December 6 have been processed, but refunds alone do not fix the loss of trust. The sight of the minister posting a photo of the IndiGo CEO sitting with folded hands summed up the mood: India’s aviation regulator and the ministry believe that the airline had failed in its fundamental duty of ensuring operational continuity.

The first and most important lesson is that growth cannot outrun operational preparedness. IndiGo has grown aggressively for years, now controlling more than half of India’s domestic market. But scale becomes a liability if systems are overly stretched or dependent on fragile rostering structures. When the FDTL phase-two norms came into force --  a change everyone in the industry knew was coming -- the airline should have had enough buffer in crew planning. It did not.

Second, communication remains the weakest point across Indian airlines. Passengers were left clueless for hours about the status of their flights. Airlines treat communication as customer service; it is, in fact, a core operational function. Poor information flow creates panic, social media uproar and political pressure — forcing interventions like the current 10 percent curtailment.

Third, the ministry’s insistence that IndiGo must continue serving all its destinations despite the cut sends a reminder to the entire sector: market share comes with obligations. Large airlines cannot choose convenience over connectivity.

Indigo stock price is down by about 12 per cent in the last five days, but still at an 9 percent gain in the year so far. Investors are beginning to doubt the strength of the stock, for sure. Read this piece by Tejal Parab on what lies ahead for the Indigo stock.

For investors, IndiGo’s crisis is a reminder that airline stocks carry a unique operational risk. Balance sheets matter, but so do scheduling systems, crew morale, regulatory compliance and the ability to manage sudden changes in norms. A single week of cancellations can wipe out months of goodwill and trigger regulatory scrutiny.

IndiGo remains financially strong, but markets will now question whether the airline’s systems have evolved at the same pace as its fleet and network. Investors must also note the new tone from the ministry: strict enforcement of fare caps, passenger convenience measures, and compliance without exception. This tightens margins and limits pricing power in crisis situations.

So, for IndiGo, the immediate task is stabilising its network and restoring confidence. The 10 percent cut is temporary, but the reputational cost is not. For the aviation sector, this episode is a reminder that operational resilience — not market share — is the real measure of strength.

India’s aviation story continues to grow. But as this crisis shows, even the market leader can skid if it loses control of its fundamentals.

According to a Jefferies report, the DGCA-mandated cut in IndiGo departures is likely to weigh on IndiGo’s near-term earnings on the back of capacity cuts and cost pressures.

“The shock to domestic air traffic will also likely spill over to the broader travel ecosystem, tempering growth for hotels and online travel agencies dependent on air-led demand,” the report adds. That sounds like a reasonable warning. 

Howard Marks: Is it a bubble? (republished from the FT)

Technical Picks: BHARTIARTL, MINDACORP, NHPC, BHARATFORG