IndiGo posts 78% profit slump as currency losses and regulatory costs bite

India’s largest airline, InterGlobe Aviation Ltd., the operator of IndiGo, reported a sharp decline in quarterly earnings after absorbing heavy foreign-exchange losses and setting aside funds for labor and passenger compensation. The announcement late Thursday triggered a drop of more than 3 percent in the carrier’s share price when trading resumed on Friday.

Profit hit by provisions and currency weakness

Net profit for the three months ended 31 December fell 78 percent year on year to 2.0 billion rupees (approximately US$24 million). The figure reflects two major one-off items:

• 5.8 billion rupees earmarked to compensate travelers affected by flight cancellations in early December.
• Nearly 20 billion rupees combined for foreign-exchange losses and costs tied to India’s newly implemented labor code.

The steep earnings reduction contrasts with the airline’s performance in previous quarters, when robust domestic demand offset rising expenses. The latest results underscore the growing vulnerability of Indian carriers to a weakening rupee, higher fuel prices and tighter labor regulations.

Currency pressures likely to persist

The Indian rupee lost around 5 percent against the U.S. dollar in 2024, the worst performance among major Asian currencies. It last traded near 91.52 per dollar and several analysts expect it to touch 92 by the end of March. A weaker rupee compresses margins for airlines such as IndiGo because roughly two-thirds of their operating costs—including fuel, aircraft leases and maintenance—are denominated in dollars, while most ticket sales on domestic routes are collected in local currency.

Mark Martin, chief executive of aviation advisory firm Martin Consulting, said the next six to 12 months will remain challenging if the rupee continues to slide and global oil prices rise. He added that expanding international services could help IndiGo earn more dollar-based revenue and partially offset currency exposure.

Operational fallout from new crew-rest rules

IndiGo cancelled more than 2,500 flights during the first week of December after India’s Directorate General of Civil Aviation (DGCA) enforced revised flight duty time limitations. The regulation requires longer mandatory rest—48 hours instead of 36—for cockpit crew and restricts late-night departures, forcing carriers to rework schedules. Chief executive Pieter Elbers described the period as “one of the most challenging weeks” in the company’s history.

The DGCA subsequently fined IndiGo 222 million rupees for failing to maintain reliable operations. The penalty is included in the 5.8 billion-rupee provision for passenger redress. IndiGo says it is now operating 2,100–2,200 flights per day and expects to fully comply with the amended rest rules by February.

Labor reform drives additional one-time charge

Beyond the flight-duty changes, India’s government in November consolidated 29 separate labor laws into four broader codes that expand eligibility for social-security and medical benefits. Contract and fixed-term workers must now receive benefits previously reserved for permanent staff. IndiGo booked a 9.7 billion-rupee exceptional charge to reflect the broader benefit obligations.

Several large Indian companies—including Tata Consultancy Services and ICICI Bank—have also reported similar charges this earnings season as they adjust to the new framework. A background note on the legislation is available from the Ministry of Labour and Employment (labour.gov.in).

Imagem: imagem internet 16

Capacity growth continues, but margins expected to narrow

Despite near-term setbacks, IndiGo is accelerating fleet expansion. Available seat kilometres (ASK), a standard measure of passenger capacity, rose 10 percent during the December quarter. Investment bank Jefferies projects further growth in the current quarter but warns that passenger revenue per ASK is likely to moderate while cost per ASK could rise due to aircraft additions.

Jefferies maintains a buy rating on IndiGo stock with a target of 6,140 rupees per share, citing the airline’s large market share and long-term demand outlook. Nevertheless, it cautions that the March quarter “is expected to be weaker,” reflecting lingering disruption costs, higher fuel prices and currency pressure.

Strategic push toward international markets

Management indicated on the earnings call that forthcoming seat growth will be “skewed toward international routes.” The move aligns with advice from industry observers who argue that higher exposure to U.S. dollars—generated on overseas services—can provide a natural hedge against rupee depreciation. It also fits with IndiGo’s broader ambition to become a major player in medium-haul Asia-Pacific and Gulf corridors, where demand has rebounded strongly since pandemic restrictions eased.

According to the International Air Transport Association, global passenger traffic is projected to surpass pre-pandemic levels in 2024, led by Asia-Pacific carriers. IndiGo’s rapid aircraft deliveries could position the airline to capture incremental demand, assuming regulatory and currency headwinds stabilize.

Passenger volumes remain solid

The carrier transported 124 million customers in 2025, a 9 percent increase from the prior year. Domestic travel still accounts for about 65 percent of revenue, underscoring the importance of India’s price-sensitive market even as the company looks abroad for growth and currency balance.

Outlook

IndiGo’s immediate focus is restoring on-time performance while digesting regulatory and labor cost adjustments. Currency volatility and fuel expenses remain key variables. Analysts will watch whether the planned shift toward international capacity can protect profitability until domestic pricing fully recovers and the rupee stabilizes.

Crédito da imagem: Amarjeet Kumar Singh / Anadolu Agency