IndiGo Shares Take a Hit: Aviation Regulator Orders Flight Cuts

IndiGo Share Price Drops After Regulator's Order

Shares of InterGlobe Aviation, also known as IndiGo, fell by as much as 2.2% to a low of ₹4853 on the BSE after the aviation regulator ordered the airline to cut 10% of its planned flights. This decision was made to deal with the crisis that left thousands of passengers stranded.

Regulator's Order and Its Impact

The Directorate General of Civil Aviation (DGCA) directed IndiGo to reduce its domestic winter schedule across all sectors by 10%. This move is expected to remove at least 220 daily flights from IndiGo’s network. The airline had already scrapped at least 2,000 services last week.

The decision was announced by civil aviation minister Ram Mohan Naidu after a meeting with IndiGo CEO Pieter Elbers. The cut was raised from an earlier 5% to address the crisis caused by the new pilot rest and duty rules that took effect on November 1.

Reason Behind the Disruptions

The disruptions at IndiGo occurred due to the new Flight Duty Time Limit (FDTL) norms, which regulate the maximum flying and minimum rest hours for pilots. These norms require airlines to have extra sets of pilots, leading to an increase in staff costs.

HSBC's View on IndiGo Stock

Despite the challenges faced by IndiGo, HSBC has maintained a ‘buy’ rating on the stock. The global brokerage expects the impact of the incidents to be short-lived. However, it has lowered its FY25 and FY26 EBTDA forecasts by 4% and 6%, respectively, and cut the IndiGo share price target to ₹5,977 from ₹6,920.

According to HSBC, the new FDTL norms could increase staff costs by ₹450 million to ₹900 million, implying a 1% increase in staff cost per ASK. The brokerage also estimates that IndiGo could cancel around 11,000 flights in total, resulting in revenue losses of ₹1-2.5 billion and an all-India loss of around ₹3-5 billion.

Investor Advice

Investors are advised to consult with certified experts before making any investment decisions, as market conditions can change rapidly and circumstances may vary. IndiGo, InterGlobe Aviation, aviation regulator, flight cancellations, and stock market trends are some of the key factors to consider when evaluating investment opportunities in the aviation industry.

• IndiGo share price has ended in the red in eight out of the last nine sessions, losing 18% during this period.
• The aviation regulator has ordered IndiGo to cut 10% of its planned flights to address the crisis caused by the new pilot rest and duty rules.
• HSBC has maintained a ‘buy’ rating on IndiGo stock, despite the challenges faced by the airline.