IndiGo flights: Southwest’s 2022 meltdown shows regulators act on failures; what's next?
IndiGo flight cancellations: JM said regulatory action including a show-cause notice to the CEO, a possible management change, is likely to dampen stock performance, besides a possible impending one-time penalty.
- Dec 8, 2025,
- Updated Dec 8, 2025 2:29 PM IST
An 8-9 per cent FY26 earnings hit is all likely for InterGlobe Aviation (IndiGo) if the ongoing situation lasts for a total of 15 days, JM Financial warned on Monday. This does not include any penalty amount, it said.
The brokerage recalled Southwest Airlines' 2022 meltdown, which was one of the worst operational meltdowns in US aviation history during December 2022, when a winter storm combined with an outdated crew-scheduling system triggered nearly 16,900-17,000 flight cancellations and disrupted over 20 lakh passengers.
The US Department of Transportation (DOT), it said, concluded that the scale of cancellations, poor communication, and a failure to provide timely refunds or rebooking constituted systemic consumer-protection violations.
"In December 2023, DOT imposed a $140 million penalty - the largest ever against a US airline - structured as $35 million payable to the Treasury and about $90 million in mandatory future travel-voucher compensation for passengers affected by delays or cancellations over the next three years. Southwest had already paid over $600 million in refunds and reimbursements, taking the total financial impact to more than $1.1 billion. The case established a strong precedent that regulators will treat large-scale operational failures as enforceable violations," JM noted.
In the case of IndiGo, JM said the 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.
"However, given the dominant 62 per cent-plus market share in the Indian Airlines industry, GOI is unlikely to curtail capacity growth given the growing demands of the Indian economy. Regulatory action including a show-cause notice to the CEO (possible management change) is likely to further dampen stock performance, besides possible impending one-time penalty," JM said.
IndiGo reportedly cancelled more than 650 flights on Sunday. That said, it operated over 1,650 flights on Sunday, up from 1,500 on Saturday. IndiGo said its on-time performance improved to 75 per cent from 30 per cent a day earlier, adding that refund and luggage processing were running at full scale for both direct and indirect bookings.
Regulators moved to contain the ongoing operational disruptions with a firm but stabilising approach. Initial steps included placing FDTL orders in abeyance and allowing pilot leave to count toward weekly rest. At the same time, investigative actions intensified. The DGCA began a high-level government inquiry and set up a four-member committee to audit IndiGo’s preparedness, manpower planning and compliance with CAR 2024. The scope now extended to scrutiny of the CEO and COO after individual show-cause notices were issued, JM Financial said.
On the consumer-protection side, the Ministry imposed fare caps on affected routes, mandated clearance of all pending refunds by 7 December, required a compulsory waiver of rescheduling fees and insisted on immediate resolution of baggage issues. The regulatory stance aimed to balance accountability, given the prima facie non-compliance cited in the DGCA notice, with short-term operational pragmatism to stabilise the network.
IndiGo acknowledged a serious operational crisis and announced a multi-layered remediation plan that included automatic refunds, hotel arrangements and a full reboot of networks, systems and rostering. The airline expected cancellations to decline materially after the 5 December peak and anticipated a return to normal operations between 10 and 15 December 2025. IndiGo also sought temporary FDTL relaxations until February 2026 and approval to adjust crew-patterning during the transition.
In parallel, the DGCA instructed IndiGo to submit a detailed crew-hiring and training ramp-up plan, a mitigation roadmap and fortnightly progress reports, along with revised Fatigue Risk Management System documentation.
"Brand perception has taken a short-term knock, but the carrier’s dominant domestic network, limited LCC substitutes and historically strong OTP should allow recovery once operations normalise (expected by mid-Dec). In the near-term, we estimate a 4 per cent dip in our for 3QFY26 ASK assuming an average 25 per cent ASK cut over a period of 15 days during the quarter," JM said.
JM said one-time costs are also expected to increase on the back of automatic refunds, hotel arrangements and baggage delivery.
"We await further clarity to revise our earnings estimates, given it’s a developing situation. Even as the FY26 earnings hit has been priced in, the stock is yet to price in 1) structural cost increase driven by regulatory actions 2) one time penalty 3) management change if any. Maintain REDUCE," it said.
An 8-9 per cent FY26 earnings hit is all likely for InterGlobe Aviation (IndiGo) if the ongoing situation lasts for a total of 15 days, JM Financial warned on Monday. This does not include any penalty amount, it said.
The brokerage recalled Southwest Airlines' 2022 meltdown, which was one of the worst operational meltdowns in US aviation history during December 2022, when a winter storm combined with an outdated crew-scheduling system triggered nearly 16,900-17,000 flight cancellations and disrupted over 20 lakh passengers.
The US Department of Transportation (DOT), it said, concluded that the scale of cancellations, poor communication, and a failure to provide timely refunds or rebooking constituted systemic consumer-protection violations.
"In December 2023, DOT imposed a $140 million penalty - the largest ever against a US airline - structured as $35 million payable to the Treasury and about $90 million in mandatory future travel-voucher compensation for passengers affected by delays or cancellations over the next three years. Southwest had already paid over $600 million in refunds and reimbursements, taking the total financial impact to more than $1.1 billion. The case established a strong precedent that regulators will treat large-scale operational failures as enforceable violations," JM noted.
In the case of IndiGo, JM said the 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.
"However, given the dominant 62 per cent-plus market share in the Indian Airlines industry, GOI is unlikely to curtail capacity growth given the growing demands of the Indian economy. Regulatory action including a show-cause notice to the CEO (possible management change) is likely to further dampen stock performance, besides possible impending one-time penalty," JM said.
IndiGo reportedly cancelled more than 650 flights on Sunday. That said, it operated over 1,650 flights on Sunday, up from 1,500 on Saturday. IndiGo said its on-time performance improved to 75 per cent from 30 per cent a day earlier, adding that refund and luggage processing were running at full scale for both direct and indirect bookings.
Regulators moved to contain the ongoing operational disruptions with a firm but stabilising approach. Initial steps included placing FDTL orders in abeyance and allowing pilot leave to count toward weekly rest. At the same time, investigative actions intensified. The DGCA began a high-level government inquiry and set up a four-member committee to audit IndiGo’s preparedness, manpower planning and compliance with CAR 2024. The scope now extended to scrutiny of the CEO and COO after individual show-cause notices were issued, JM Financial said.
On the consumer-protection side, the Ministry imposed fare caps on affected routes, mandated clearance of all pending refunds by 7 December, required a compulsory waiver of rescheduling fees and insisted on immediate resolution of baggage issues. The regulatory stance aimed to balance accountability, given the prima facie non-compliance cited in the DGCA notice, with short-term operational pragmatism to stabilise the network.
IndiGo acknowledged a serious operational crisis and announced a multi-layered remediation plan that included automatic refunds, hotel arrangements and a full reboot of networks, systems and rostering. The airline expected cancellations to decline materially after the 5 December peak and anticipated a return to normal operations between 10 and 15 December 2025. IndiGo also sought temporary FDTL relaxations until February 2026 and approval to adjust crew-patterning during the transition.
In parallel, the DGCA instructed IndiGo to submit a detailed crew-hiring and training ramp-up plan, a mitigation roadmap and fortnightly progress reports, along with revised Fatigue Risk Management System documentation.
"Brand perception has taken a short-term knock, but the carrier’s dominant domestic network, limited LCC substitutes and historically strong OTP should allow recovery once operations normalise (expected by mid-Dec). In the near-term, we estimate a 4 per cent dip in our for 3QFY26 ASK assuming an average 25 per cent ASK cut over a period of 15 days during the quarter," JM said.
JM said one-time costs are also expected to increase on the back of automatic refunds, hotel arrangements and baggage delivery.
"We await further clarity to revise our earnings estimates, given it’s a developing situation. Even as the FY26 earnings hit has been priced in, the stock is yet to price in 1) structural cost increase driven by regulatory actions 2) one time penalty 3) management change if any. Maintain REDUCE," it said.