DGCA clampdown and flight cuts may deepen IndiGo’s financial hit, analysts warn

The Directorate General of Civil Aviation (DGCA) on Wednesday formed an eight-member team to monitor IndiGo's daily operations, including two officials who will be stationed at the airline's Gurugram headquarters. The team will submit daily reports to the aviation regulator on IndiGo's fleet, average stage length, number of pilots, network details and crew utilization, among other details.
Despite a 10% cut in IndiGo's daily flights ordered on Tuesday, the airline may find it challenging to keep costs under control, given that it still needs to hire more pilots, a spot of bother for investors. Shares of InterGlobe Aviation Ltd, which operates IndiGo, plunged 17% between 1 and 10 December, a period when the BSE Sensex declined 1.5%.
“There’s a flat 10% topline impact that we foresee now. The airline will continue to bear maintenance costs, lease payments and fuel costs. These will go up. So, the hit on Ebitda is around 30-35% for the full year," said Gagan Dixit, vice-president, oil & gas and aviation at Elara Capital. In FY25, the airline recorded a revenue of ₹80,803 crore.
IndiGo does not give a full-year guidance beyond stating that the company was expecting capacity growth in the “mid teens". An email sent to IndiGo on whether the airline would revise its revenue or profitability guidance went unanswered.
Analysts at Kotak Institutional Securities, in their 8 December report, said "learnings from the Southwest Airlines incident from December 2022 indicate sharp earnings cuts for Indigo in the near term."
Kotak analysts lowered IndiGo's profit after tax estimate by 25% to ₹6,196 crore; however, this number may rise as it does not factor in the 10% cut announced on Tuesday. IndiGo reported ₹7,258.4 crore in profit last year, suggesting the airline’s net income may be lower this fiscal year than it was in the year ended March 2025.
Emkay Research analysts Sabri Hazarika and Arya Patel, in a 9 December note, said, “as of now, we estimate a 17% ex-forex PBT cut due to a 2% impact each on volume and yield".
The airline could also see its CASK (cost per available seat kilometre), a metric that measures its operating cost per seat, go up. The brokerage, however, adds that the situation remains volatile. The research firm’s 9 December note now projects IndiGo’s FY26 revenue to be 3% lower, revising it down to ₹87,508 crore from its earlier estimate of ₹90,346.5 crore.
“There is an 8 -10% hit in topline for FY26, we expect if the airlines continue to operate at 10% fewer routes. And if a proportionate ticket price rise is not initiated by Indigo, then we see a 20 -30% impact on profitability in the coming quarter (Jan - Mar)," said Prashanth Tapse, Research Analyst at Mehta Equities, a brokerage firm.
For Indigo, aircraft lease payment, maintenance costs and fuel account for 70% of its costs. Pilot hiring is generally part of their employee costs, accounting for nearly 10% of total costs.
“You will need those pilots, if not now, then within the next year. And pilot hiring is not an overnight process because of extended and rigid notice periods," Elara’s Dixit said.
IndiGo, which accounts for two-thirds of the country’s daily flight schedules, reported over 4,000 cancellations in December, leading to hundreds of thousands of passengers stranded at airports and making the swanky airports resemble bustling railway stations at peak hours. This prompted the regulator to reduce its 2200 daily flights, and the Civil Aviation Minister Ram Mohan Naidu warned of strict action against the airline. On Wednesday, PTI reported that it cancelled nearly 220 flights at three major airports, including Delhi and Mumbai.
The turmoil drew criticism from the Delhi High Court on Wednesday. Hearing a public interest litigation (PIL), the court questioned the Centre why the situation was allowed to escalate into a crisis.
“The ticket, which was available for ₹5,000, the prices went up to ₹30,000 to ₹35,000. If there was a crisis, how could other airlines be permitted to take advantage? How can it (ticket price) go up to ₹35,000 and ₹39,000? How could other airlines start charging," asked the bench, which heard the matter for more than one-and-a-half hours. The counsel for the Centre and the DGCA informed the court that the statutory mechanism was totally in place and a show-cause notice was issued to IndiGo.
On Wednesday, IndiGo’s chairman Vikram Singh Mehta said that the airline is sorry for the inconvenience to passengers.
“The board has been closely involved with this matter for many months. Both the board and the risk management committee have received relevant information from the management on the implementation of the rules," said Mehta, former CEO of Shell India.
“Last week’s events are a blemish on the airline’s pristine - clean record. The company has erred. There is no denying this. It now has to build back your trust. This will not be easy. It will depend on actions, not words. It will be a journey," Mehta added.
On Wednesday, DGCA said that it had summoned the airline’s CEO Pieter Elbers and its senior executives for another review meeting. Analysts at JM Financial Regulatory have mentioned that “a show-cause notice to the CEO" suggests a “possible management change", a point reiterated by ICRA, the ratings agency. ICRA on Wednesday said it will continue to monitor “Continuity of senior leadership in the context of the show cause notices issued by the DGCA to IndiGo's Chief Executive Officer and Chief Operating Officer."
On 6 December, DGCA issued a show-cause notice, seeking an explanation from Elbers and Chief Operating Officer Isidre Porqueras for the disruption in the airline’s operations.