Source: LIVEMINT
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InterGlobe Aviation Ltd (IndiGo) landed smoothly in the March quarter. A demand surge, led largely by the Mahakumbh festivities in January-February, helped the airline’s capacity, measured by available seat kilometers (ASK), increase by 21% year-on-year last quarter.
Yields, a measure of pricing, were better than expected, up 2.4% at ₹5.32. Lower operating costs and benign aviation turbine fuel expenses translated into Ebitdar – a key metric for airlines – rising almost 60% year-on-year to about ₹6,950 crore, ahead of the consensus estimate. Ebitdar is earnings before interest, tax, depreciation, amortisation and lease rentals.
But IndiGo investors may have to buckle up for some turbulence in the June quarter (Q1 of FY26). Due to the closure of Pakistan’s airspace, IndiGo had to suspend flights to Almaty and Tashkent. The impact will also be felt on several routes and daily flights, which may lead to additional flying time of 20-30 minutes, management executives said on an earnings call.
Cancellations in May weighed on passenger volumes and pricing. If capacity outpaces demand, yields may come under pressure in Q1.
Analysts at Jefferies India said the negative impact on travel demand in Q1 could be a one-off blip for IndiGo. Moreover, softer crude oil prices will help the airline ride out near-term demand weakness. Jefferies raised its earnings per share estimate by about 6% on a lower crude estimate of $72 per barrel, to be offset by expected weakness in Q1.
IndiGo is hoping for some recovery in travel booking trends and yields in June but refrained from giving yield guidance. However, some analysts are upbeat on this front.
“We expect the overall pricing environment to remain stable with yields of ₹5.1 over the next two years as the aviation market is now a duopoly with limited threat of predatory pricing," PL Capital said in a report dated 22 May.
The airline has guided for mid-teen capacity growth for Q1. It maintained early double-digit capacity growth guidance for FY26. Aircraft additions as well as new routes are expected to contribute to growth.
IndiGo added three destinations to its domestic network and seven to its margin-accretive international network. The company had 91 domestic destinations and 40 international destinations in FY25. The management expects 40% contribution of international ASK by 2030 from 30% currently.
Also, IndiGo announced direct flights to Amsterdam and Manchester from Mumbai starting July. According to Nuvama Research, wide-body long-haul direct flights on these routes may be risky for IndiGo.
Wide-body aircraft are large commercial airplanes made for long-duration flights. Nuvama said low-cost long-haul operations have yielded mixed results globally. Also, it cautioned that competition is relatively high on international routes vis-à-vis the domestic market.
Nonetheless, IndiGo’s efforts to deepen its international presence, increased thrust on “IndiGoStretch," a premium seating option, and declining grounded aircraft count are seen as margin levers.
In FY26, IndiGo expects the cost per available seat kilometer (CASK) ex-fuel to remain little changed from FY25 levels. This would be driven by expected cost escalations for airport rentals and maintenance, offset by the scaling down of damp-leases during the year. CASK-ex fuel was ₹3.2 in FY25, up from ₹2.66 in FY24.
The IndiGo stock hit a 52-week high of ₹5,665.50 on 19 May following the easing of India-Pakistan tensions and is now only 3% shy of this peak. Investors can hardly complain, with the shares having gained 20% so far in 2025. The potential softness in Q1 may be a short-term hurdle for the stock.
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