IndiGo shares crash 8.28% as India signals strict action over flights crisis

IndiGo is now facing higher costs due to the flight cancellations, along with added pressure from a weaker rupee and increased crew expenses, Jefferies says.

Shares of InterGlobe Aviation Ltd., which operates IndiGo, plunged after the government signaled it’ll penalise India’s largest airline after mass flight cancellations last week triggered one of the country’s worst air disruptions.

A passenger waits outside the IndiGo Airlines kiosk at the Kempegowda International Airport in Bengaluru on 6 December. (AFP)

The IndiGo share price dropped 8.7% on Monday—its biggest plunge since February 2022—and marked a seventh day of selling that’s cumulatively cut $4.5 billion from the company’s market value. The steer from Narendra Modi-led government follows local aviation regulator’s demand over the weekend that its Chief Executive Officer Pieter Elbers explain what lead to the fiasco.

“The regulatory action including a show-cause notice to the CEO (possible management change) is likely to further dampen stock performance besides possible impending one-time penalty,” JM Financial Ltd. analysts Ashutosh Somani, Anirudh Nagpal and Anuj Khandelwal wrote in a 7 December note.

“Near-term, we estimate earnings hit of 8-9% for FY26 if the situation lasts for a total of ~15 days with five days already done (not including the penalty amount).”

IndiGo Flight Cancellations

Mass cancellations by IndiGo, which has nearly 66% domestic market share, left thousands of passengers stranded last week across major Indian airports. In a statement on Sunday, the airline said it’s on track to operate more than 1,650 flights, with on-time performance improving to 75% and was expecting operations to normalise by 10 December.

The carrier, which runs a “lean, high-utilisation model”, has been hit hardest by new pilot rules that bar airlines from substituting weekly rest with leave, according to a note by Jefferies analysts including Prateek Kumar. IndiGo is facing rising costs from flight cancellations, compounded by pressures from a weaker rupee and higher crew expenses, the brokerage said.

The disruption, which started late Tuesday night last week, stemmed largely from the pilot shortage due to new rules that extended mandatory rest periods and reduced the number of permitted night landings. Those rules have been put in abeyance by the government to help the airline stabilise.

Action Against Inaction

India will take strict actions against IndiGo “to set an example for the sector,” Aviation Minister Kinjarapu Rammohan Naidu said in a reply in parliament on Monday. The government would like more airlines to come in as the growing aviation market has the capacity to absorb five big carriers, he said.

IndiGo told regulators Monday that recent service disruptions stemmed from the “compounding effect of multiple factors” which led to an “unfortunate and unforeseeable confluence” and that it’s too early to identify a single cause.

“IndiGo will definitely be taken to task by the government,” Vandana Singh, chairperson at Federation of Aviation Industry in India told Bloomberg Television on Monday. The government “is putting things in bold font that this kind of abuse of dominance or artificial adjustment is not going to work.”