Moody’s flags IndiGo’s regulatory missteps as credit negative despite stable rating
Although IndiGo’s Baa3 issuer rating with a stable outlook remains unchanged, Moody’s downgraded the airline’s human capital category score from 3 to 4, citing the impact of delayed hiring on operations.
- Dec 8, 2025,
- Updated Dec 8, 2025 5:59 PM IST
Moody’s Investors Service has termed IndiGo’s failure to effectively prepare for India’s revised flight duty time regulations as credit negative, despite the airline receiving a temporary exemption from the Directorate General of Civil Aviation (DGCA).
The disruption — triggered by Phase 2 of the DGCA's new Flight Duty Time Limitation (FDTL) norms that took effect on November 1 — led to over 1,600 flight cancellations on December 5 alone and pushed IndiGo’s on-time performance down to 68% in November, from 84% in October. Moody’s said the regulations, aimed at enhancing pilot safety, had been public for over a year, but IndiGo failed to adequately prepare for the shift.
The agency noted that while IndiGo's lean operations offer cost advantages during stable periods, they lack resilience in times of regulatory change. The operational fallout, compounded by winter weather, stranded passengers and exposed gaps in crew planning and oversight.
Although IndiGo’s Baa3 issuer rating with a stable outlook remains unchanged, Moody’s downgraded the airline’s human capital category score from 3 to 4, citing the impact of delayed hiring on operations. It also maintained a governance score of 3, indicating moderate governance risk, and highlighted the absence of employee unions but pointed to the bargaining strength of pilots via broader industry associations.
The DGCA’s exemption, valid until February 10, 2026, requires IndiGo to submit biweekly compliance reports and a detailed 30-day roadmap to achieve full FDTL adherence. The regulator has also issued show-cause notices to IndiGo CEO Pieter Elbers and COO Isidro Porqueras.
The Ministry of Civil Aviation had directed the airline to process all customer refunds by December 7 without penalty. Though no financial penalties have yet been imposed, Moody’s warns that they remain a possibility. It also highlighted potential reputational damage, especially for IndiGo’s global code-share partnerships.
Moody’s said IndiGo’s fundamentals — dominant domestic market share, favorable macroeconomic conditions, and sustainable leverage — support its current rating. However, it expects a negative impact on profitability for the fiscal year ending March 2026, with the full financial hit still uncertain as the airline adjusts operations under the new rules.
Moody’s Investors Service has termed IndiGo’s failure to effectively prepare for India’s revised flight duty time regulations as credit negative, despite the airline receiving a temporary exemption from the Directorate General of Civil Aviation (DGCA).
The disruption — triggered by Phase 2 of the DGCA's new Flight Duty Time Limitation (FDTL) norms that took effect on November 1 — led to over 1,600 flight cancellations on December 5 alone and pushed IndiGo’s on-time performance down to 68% in November, from 84% in October. Moody’s said the regulations, aimed at enhancing pilot safety, had been public for over a year, but IndiGo failed to adequately prepare for the shift.
The agency noted that while IndiGo's lean operations offer cost advantages during stable periods, they lack resilience in times of regulatory change. The operational fallout, compounded by winter weather, stranded passengers and exposed gaps in crew planning and oversight.
Although IndiGo’s Baa3 issuer rating with a stable outlook remains unchanged, Moody’s downgraded the airline’s human capital category score from 3 to 4, citing the impact of delayed hiring on operations. It also maintained a governance score of 3, indicating moderate governance risk, and highlighted the absence of employee unions but pointed to the bargaining strength of pilots via broader industry associations.
The DGCA’s exemption, valid until February 10, 2026, requires IndiGo to submit biweekly compliance reports and a detailed 30-day roadmap to achieve full FDTL adherence. The regulator has also issued show-cause notices to IndiGo CEO Pieter Elbers and COO Isidro Porqueras.
The Ministry of Civil Aviation had directed the airline to process all customer refunds by December 7 without penalty. Though no financial penalties have yet been imposed, Moody’s warns that they remain a possibility. It also highlighted potential reputational damage, especially for IndiGo’s global code-share partnerships.
Moody’s said IndiGo’s fundamentals — dominant domestic market share, favorable macroeconomic conditions, and sustainable leverage — support its current rating. However, it expects a negative impact on profitability for the fiscal year ending March 2026, with the full financial hit still uncertain as the airline adjusts operations under the new rules.