Indigo Airlines' Stock Downgraded: What You Need to Know

Changes in Indigo Airlines' Stock Forecast

Recently, we made some changes to our estimates for Indigo Airlines' stock. We reduced our EBITDAR (a measure of a company's profitability) forecasts by 13%, 8%, and 12% for the next three years. This led us to downgrade the stock from a BUY to a HOLD, with a new target price of Rs5,236.

Reasons for the Downgrade

The main reason for this change is the implementation of new Flight Duty Time Limitation (FDTL) norms. These norms affect how many hours pilots can fly, which may lead to an increase in employee costs for the airline. With a pilot shortage in the industry, hiring new pilots could be challenging, leading to higher costs and potentially slowing down the airline's growth.

• Average salary per pilot is around Rs6.8 million per year.
• There is a shortage of pilots, with only 1,213 commercial licenses issued in 2024.
• Employee costs per ASKM (Available Seat Kilometer) are expected to increase to Rs0.51, Rs0.57, and Rs0.62 over the next three years.

Impact on the Airline's Growth

We expect Indigo Airlines' sales and EBITDAR to grow at a rate of 9% and 7% over the next three years. However, the new FDTL norms pose a challenge to the airline's cost structure and growth. As a result, we have cut our ASKM forecast by 4-12% over the next three years.

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