'Significantly impacted': ICRA warns IndiGo’s near-term finances to suffer as flight chaos takes a toll

IndiGo has suffered a sharp operational setback that is expected to weigh heavily on its financial performance for the current fiscal, credit rating agency ICRA said in a note on Wednesday. The carrier has recorded more than 11,000 cancellations in recent days, with an acute peak on December 5 when roughly 1,600 flights, about 70% of the day’s schedule, were cancelled during a network reboot prompted by revised Flight Duty Time Limitation (FDTL) norms.

ICRA’s outlook highlights two immediate effects: a material hit to near‑term profitability and pressure on earnings for the current financial year. The agency cautioned that lost revenue from cancellations, costs of passenger compensation and re‑accommodation, higher operational expenses to stabilise schedules, and potential regulatory penalties will constrain margins in the months ahead. “IndiGo’s near‑term financial performance expected to be significantly impacted,” the note states, underlining the severity of the disruption.

The crisis exposed the vulnerability of IndiGo’s high‑utilisation model. ICRA observed that the airline’s heavy night-time operations and low operational buffers left little room to accommodate the stricter night‑duty caps and mandated pilot rest introduced under Phase II of new regulations. While IndiGo’s lean cost base has been a competitive differentiator, the scale of the disturbance pointed to shortcomings in crew planning and contingency resources that intensified the fallout.

Besides, the rating agency noted that profitability for the current fiscal year will remain under pressure, not only from operational disruptions but also from the depreciation of the Indian Rupee against the US Dollar. 

"IndiGo’s financial leverage (Net debt, including lease liabilities,  minus free cash/ EBITDAR) in FY2026 is likely to breach ICRA’s negative trigger of 2.5x. However, in its base case, ICRA does  not expect the breach to persist in the next fiscal, implying that the medium-term credit impact of this event should be largely manageable," it noted. 

Despite the headwinds, ICRA flagged a critical mitigating factor: IndiGo’s strong liquidity position. The carrier held approximately Rs 38,500 crore in unencumbered cash and equivalents as of September 30, 2025, offering a sizeable buffer to absorb immediate revenue shocks and meet capital expenditure needs without resorting to significant fresh borrowings. “ICRA says large liquidity buffers give company significant cushion to bear near‑term earnings pressure,” the agency noted.

Operational recovery has begun: IndiGo rebooted networks, rosters and systems to stabilise schedules and gradually restore flights. The Directorate General of Civil Aviation granted temporary relief on compliance with the night‑duty norms until February 10, 2026, a move that should ease near‑term execution and allow a phased return to normalcy. 

What other brokerages said

IndiGo parent InterGlobe Aviation fell over 3% on December 10, extending its losing streak after the government ordered a 10% cut in planned flights following mass cancellations. The stock closed at Rs 4,808.35, after falling 3.12%.

HSBC, Morgan Stanley, UBS and Jefferies all retained bullish calls but trimmed target prices, citing higher costs and disruption from new FDTL norms. Brokerages flagged rising crew expenses, temporary reputational damage and pressure on near-term margins. Most noted that operations are stabilising and long-term growth remains intact despite regulatory and cost headwinds.

JM Financial, however, maintained a ‘Reduce’ rating, warning of structural cost increases and potential earnings impact if disruptions persist.