India’s largest airline sees shares drop after earnings plunge 78%

India’s largest airline, Indigo, that cancelled greater than 2,500 flights inside days final month inflicting large disruptions, reported a 78% drop in revenue within the December quarter, sending its shares down greater than 3%.

The corporate, which reported outcomes after market shut on Thursday, made a provision of 5.8 billion rupees ($63 million) towards compensation following flight disruptions in December.

The bigger influence on its earnings, nevertheless, was from a one-time cost owed to the implementation of recent labor code and foreign exchange losses, collectively amounting to about 20 billion rupees.

The shortage of progress on the U.S.-India commerce deal has harm investor confidence, contributing to capital outflows, and has weighed on the rupee, making it Asia’s worst performing forex final yr — down about 5%.

The forex was final buying and selling at 91.52 and consultants predict it to slide additional to 92 rupee per greenback stage by finish of March, which might spell extra hassle for forex-exposed companies together with Indigo.

The March quarter for the airline is “anticipated to be weaker” regardless of a ten% rise in accessible seat kilometers, or ASK, in keeping with a report by Jefferies on Thursday. ASK is a key metric for measuring passenger capability.

The brokerage added that the airline will see a “moderation” in passenger income per accessible seat kilometer (PRASK) and enhance in value per accessible seat kilometer as the corporate “continues so as to add plane.”

Jefferies maintains a purchase ranking on the inventory with a goal worth of 6,140 rupees per share.

Airways in India face strain on each prices and income fronts as a majority of the airways get practically 65% of their income from home journey, for which passengers pay in Indian rupees, however a lot of the prices are in {dollars}.

Indigo is including extra capability as a result of they should develop, however the subsequent 6-12 months shall be robust, as we anticipate the rupee to weaken additional and gasoline prices to rise, stated Mark Martin, founder and CEO of aviation consulting agency Martin Consulting.

He advised CNBC that Indigo could have to fly on extra worldwide routes to enhance its greenback earnings. This was additionally hinted at within the firm’s earnings name, with the administration saying that new seat additions shall be skewed towards worldwide routes.

Labor reforms in India, which have expanded the scope and eligibility of social safety advantages for workers, additionally weighed on Indigo’s earnings because it acknowledged one-time expenses of 9.7 billion rupees.

A number of massive Indian corporations, resembling Tata Consultancy Providers and ICICI Financial institution, have reported a one-time hit on earnings as a result of labor reforms through the December quarter.

In November, the Indian authorities introduced reforms, consolidating 29 separate labor legal guidelines into 4 complete codes, strolling a tightrope between balancing enterprise pursuits and worker welfare.

Beneath these codes, fastened time period or contract workers will now qualify for advantages accessible to everlasting employees, together with go away, medical, and social safety.

Nonetheless, this was not the one change in authorities regulation that impacted Indigo over the past quarter.

In November final yr, authorities applied flight obligation time limitation norms below which airways had been mandated to function fewer late-night flights and relaxation time for crew was elevated from 36 hours to 48 hours.

Within the first week of December, Indigo cancelled hundreds of flights, blaming it on the adjustments to the pilot relaxation coverage. Early December was the “essentially the most difficult weeks” in Indigo’s historical past, stated Pieter Elbers, chief govt of the Indigo.

Final week, India’s Directorate Normal of Civil Aviation ordered the airline to pay a penalty of 222 million rupees in reference to the operational disruptions, which is a part of the one-time provisions.

Presently, Indigo is working 2,100-2,200 day by day flights, stated Elbers, who had come below hearth following the disruption in December, including that the airline will be capable of adjust to the federal government’s flight obligation time limitation norms by February.

Indigo served 124 million prospects in 2025, up 9% on yr, in keeping with its assertion.