Why Did IndiGo's Profit Plunge 78% and Send InterGlobe Aviation Shares Tumbling?

India’s largest airline, IndiGo, reported a sharp decline in its quarterly earnings.

InterGlobe Aviation, IndiGo’s parent company, saw its consolidated net profit plummet by 78% in the third quarter of the financial year 2025–26 (Q3 FY26). The airline’s profit fell to approximately ₹550 crore, down from ₹2,449 crore in the same period last year. Following the announcement, InterGlobe Aviation shares declined nearly 4% on the bourses.

Operational and Financial Headwinds

The significant IndiGo profit plunge was primarily caused by substantial one-time expenses. These exceptional items totaled approximately ₹1,546.5 crore.

• Operational Disruptions: The airline set aside ₹577.2 crore (about $63 million) to cover costs from mass flight cancellations in December. These disruptions followed the implementation of new Flight Duty Time Limitation (FDTL) rules.
• New Labor Code: A provision of ₹969.3 crore was made for the adoption of a new labor code.
• Foreign Exchange Losses: Currency movement related to dollar-based future obligations added ₹1,035 crore in losses.

In total, the airline faced a combined financial hit of over ₹2.58 billion from these factors. The Directorate General of Civil Aviation (DGCA) also imposed a fine of ₹22.2 crore on the airline for the December chaos.

Currency and Market Pressure

The India aviation market faces unique cost challenges. Most airlines earn about 65% of their revenue in Indian rupees from domestic travel. However, a majority of their costs, like fuel and aircraft leasing, are denominated in US dollars.

This makes the airlines highly vulnerable to Rupee depreciation impact. The Indian Rupee was Asia’s worst-performing currency last year, depreciating by about 5%. As of January 23, the Rupee traded near 91.41 per dollar. Experts forecast the Rupee could weaken further to the 92 per dollar level by the end of March. This forecast signals continued pressure on forex-exposed businesses, including IndiGo.

Investor sentiment is also dampened by the prolonged delay in finalizing a U.S.-India trade agreement. The lack of progress contributes to capital outflows, further weakening the currency.

Capacity and Strategy Outlook

Despite the short-term turbulence, IndiGo is pushing ahead with its international route expansion strategy. The airline reported an 11.2% year-on-year growth in Available Seat Kilometers (ASK) in Q3. Management hinted that future capacity additions will be skewed toward international routes. This move is a strategic effort to increase dollar-denominated earnings, providing a natural hedge against the weakening Rupee.

Industry analysts project a challenging near-term outlook for IndiGo:

• The March quarter is “expected to be weaker,” despite a projected 10% rise in ASK.
• Passenger Revenue per Available Seat Kilometer (PRASK) is expected to see “moderation.”
• Cost per Available Seat Kilometer (CASK) is projected to increase as the company adds more aircraft.

Jefferies, a leading brokerage, maintains a ‘Buy’ rating on the stock. They have set a Jefferies price target of ₹6,140 per share. This suggests a long-term confidence in IndiGo’s structural strengths and dominant market position, despite the current operational and financial headwinds.

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