IndiGo’s crisis, which led to more than 1,000 flight cancellations in one day, stemmed from the airline being unprepared to implement the DGCA’s updated Flight Duty Time Limits for pilots
Shares of InterGlobe Aviation, the parent company of IndiGo, plummeted by as much as 7% in recent trading sessions, extending a sharp, week-long decline as the airline grapples with massive flight cancellations and intense regulatory scrutiny.
The crisis, which saw the carrier cancel over 1,000 flights in a single day—a record for any Indian airline—was triggered by operational unpreparedness in implementing the Directorate General of Civil Aviation’s (DGCA) revised Flight Duty Time Limitations (FDTL) for pilots.
The market reaction wiped out tens of thousands of crores in investor wealth, fuelled by multiple brokerages cutting their earnings estimates and target prices, citing lasting cost pressures and operational turbulence.
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IndiGo’s expenses to climb
Financial analysts are sounding the alarm that the FDTL compliance, which mandates stricter rest periods, extended night hours, and fewer night landings for pilots, will structurally increase IndiGo’s operating expenses.
Brokerages like Investec estimate that meeting the updated FDTL requirements, which must be fully adhered to by a forthcoming deadline, may force IndiGo to hire approximately 20% more pilots per aircraft, significantly raising employee costs. The additional expenses could raise the airline’s costs per available seat kilometre (CASK) and, without corresponding fare increases, potentially slash the company’s profit before tax by nearly 25%.
Further compounding the financial strain are external factors, including a sharp depreciation of the Indian Rupee against the US Dollar (increasing costs for dollar-denominated leases and maintenance), as well as potential regulatory fines and non-fuel operational costs resulting from the network disruptions.
The DGCA has taken a firm stance, issuing a show-cause notice to IndiGo CEO Pieter Elbers and other senior management, demanding an explanation for the operational failures. The regulator pointed to inadequate staffing and crew rostering as the primary causes of the mass chaos, which left thousands of passengers stranded nationwide.
While some global brokerages, such as Jefferies and UBS, have maintained a “Buy” rating on the stock, they acknowledge that the airline’s cost curve is “turning adverse.” They view the current turmoil as a short-term blip, betting on IndiGo’s long-term dominance and network strength in the domestic market, but caution that near-term earnings performance will remain volatile as the airline resets its system to accommodate the new regulations.
IndiGo has since begun adjusting its network and crew rosters, anticipating a full stabilisation of operations in the coming weeks.
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