What is IndiGo’s five-step strategy to manage operational losses?   

IndiGo posted Rs 2536 crore net losses in the March quarter of FY26, after staying profitable for the last two years, due to high fuel costs, foreign exchange losses, and reduced operational margins.

IndiGo is in the process of adopting measures to reduce the operational losses in the second quarter of FY27. The airline said the load factor has started improving from May onwards and June should be normal with respect to the Middle East sector.  

In February and March, IndiGo’s 160 international daily frequencies to the Middle East and Europe were cancelled due to the conflict and now two-thirds of the network has resumed. IndiGo expects complete normalcy starting from June onwards.  

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Here are the five things IndiGo is doing.

Increasing airfare

IndiGo MD Rahul Bhatia said that the airline will increase airfare to balance the increasing operational costs.

“It is clear that we need to take care to protect ourselves from additional costs. Fares are sticking, and demand is there; you have to take pricing up to the point where you start to see elasticity coming. Now we see that fare come up and market is inelastic to the demand,” said Bhatia during the company’s Q4FY26 earnings call.

He said that FY26 was marked by an exceptionally challenging operating environment, which materially impacted its profitability.

"During the year, our capacity grew by 9.5% and total income increased by over 6%. Excluding the impact of foreign exchange and exceptional items, IndiGo delivered a profit of Rs 75 billion," he said.

The airline is also looking at capacity optimisation to save fuel and has cut 10-12% network from June 1 to August 31.

Remain a hybrid model

IndiGo will continue to operate as a hybrid service model despite having international expansion plans with wide-body aircraft orders. IndiGo controls 63% of the domestic market share.   

Bhatia said that the company will continue working on a strategy to protect the short-haul business with A320s/A321s while increasing long-haul using XLRs and A350 for future expansion.

On whether IndiGo looks to consolidate the market with Air India cutting 25% flights on the domestic sector, he said that the company will watch the space and optimise capacity based on the market demand.

Domestic network remains key to IndiGo’s operations and has been able to completely pass on the 25% jet fuel price hike through high airfare, reduction of certain airport taxes, and reduction of VAT on ATF by Mumbai and Delhi.  

Owning more aircrafts

IndiGo is changing its business model from leasing aircraft to owning them. Currently, 80% of the airlines’ fleet of 441 aircraft is leased. The rising dollar against the rupee has made airlines decide to utilise the cash to  

IndiGo also approved a plan to partially prepay up to $450 million in lease obligations to its wholly owned subsidiary, which will use the funds to acquire aircraft, engines and ⁠parts. The move is expected to help the IndiGo group own a larger share of its fleet-related assets instead of relying solely on leased equipment.

“Cash in sitting in a bank and what returns you get is 6.5-7.5% Vs an owning aircraft, which otherwise has huge rental costs. We are deploying cash to start owning the asset. Sooner you lock in and own the aircraft and the capex get mitigated. Having said that, we are in the aviation industry and will require 20-25% topline as a safety net, which is around Rs 20,000-Rs 25,000 crore,” said Negi.

Returning damp leases and old aircraft

IndiGo plans to return most of its damp leased fleet and reduce the use of older-generation aircraft, which consume 15-18% more fuel than the newer aircraft.

“As part of this selective recalibration, calibration of certain routes is warranted to protect the margin. This optimization will involve reducing the usage of older-generation aircraft and returning certain narrow-body damp-leased aircraft that are naturally more expensive,” said Negi.

The airline is also evaluating the future role of its 31-aircraft Airbus A320ceo fleet as it seeks to improve efficiency. IndiGo currently operates a damp leased fleet comprising five A320ceos, four A321neos and five Boeing 737s, alongside six 787-9s leased from Norse Atlantic Airways that are being used on long-haul services to Amsterdam, London and Manchester. It has already pulled out of the Copenhagen operations.

The damp-leased planes arrangement has the aircraft, cockpit crew, maintenance and insurance taken care of by the operating carrier, while the selling of seats, fuel, cabin crew and airport costs are taken care of by the marketing carrier. The payments happen in USD.

IndiGo is also in talks with Norse about optimizing long-haul operations. “We are in discussion with our widebody ACMI partner to optimize our long-term long-haul operations due to ongoing airspace restrictions and elevated fuel cost,” Negi said.

 However, there is no plan to delay deliveries of 60 wide-body A350-900s.

Hedging fuel cost

IndiGo is mulling hedging fuel costs to protect margins. Airline hedge fuel costs through financial contracts that lock in prices, which helps in cushioning sudden fuel hikes.  Jet is the largest expense for airlines, and it remains 50-60% of operational costs in the current scenario.

“We will be putting our minds to start looking at whether fuel hedging is another option...given what we've experienced in the last three months now," said IndiGo CFO Gaurav Negi.

The airlines introduced a fuel surcharge and have managed to recover costs due to high jet fuel prices on the domestic network, but cannot completely offset this on the international sector, where jet fuel has risen 100%.