IndiGo Shares Continue to Fall as Airline Faces Major Operational Disruptions Even After 10 Days

IndiGo’s share price opened 3 per cent lower on Thursday after the airline reduced its capacity and passenger unit revenue forecast for ‌the ‌third quarter. At 10.36 am, shares traded flat at ₹4,802, after opening 3 per cent lower at ₹4,650 against the previous close of ₹4,805.50 on the NSE. This, after the civil aviation regulator DGCA directed the carrier to ‍cut 10% of its domestic winter schedule following mass flight cancellations. The airline said it now expects its third-quarter capacity to grow in "high single to early double-digit percentage", down from the earlier forecast of growth in "high teens." The airline also faced another setback after a brokerage cut price target following the carrier lowering its near-term expectations. Kotak Securities lowered its price target for the airline to Rs 5,350 from Rs 5,700, saying IndiGo may face pressure as rivals move to use its unused flight slots and as the carrier works to hire more experienced pilots.

Morgan Stanley kept its ‘Overweight’ view, with a target of Rs 6,540, and said the long-term outlook for the company remains steady despite weak earnings in the coming months. Morgan Stanley said the stock could offer entry opportunities if short-term earnings remain under pressure. It said the company’s long-term prospects are still supported by steady industry growth, its widening lead over domestic competitors and the expansion of its international routes. It noted that the stock trades at about eight times its estimated FY27 earnings before interest, tax, depreciation and amortisation, compared with a pre-pandemic average of 8.5 times. The brokerage said movements in the rupee, fuel prices and the pace of international travel growth pose risks. Rising competition, capacity expansion by peers and higher crude oil prices also remain challenges.

Jefferies kept a 'Buy' call on the stock, with a target price of Rs 7,025 per share. The international brokerage noted that the company has been hit the hardest by the new FDTL norms, which reduce pilot duty hours and increases crew requirements. It noted that the rule change coincided with IndiGo’s capacity expansion, technical issues and congestion, triggering cascading disruptions. Airline is now recalibrating schedules and expects normalcy by mid-December, Jefferies noted, adding that IndiGo will face rising costs from disruptions and higher crew expenses.

JM Financial kept a 'Reduce' call on the stock, with a target price of Rs 5,570 apiece. The domestic brokerage said that recent mismanagement leading to significant flight cancellations is largely a function of new FDTL norms impact kicking in immediately post Airbus software upgrade challenges. "The recent incident is likely to lead to a higher CAGR in CASK ex-fuel-ex-forex in future years subject to regulatory actions," it said.