IndiGo Stock Plummets as Government Orders Flight Cuts Amid Cancellations

IndiGo's Stock Takes a Hit

The shares of InterGlobe Aviation, the parent company of IndiGo, dropped more than 2 percent in early trading hours on December 10. This comes after the Indian government ordered the airline to cut 10 percent of its planned flights following mass cancellations.

Government Intervention

Union Civil Aviation Minister Ram Mohan Naidu announced the cut on X, stating that the reduction will help stabilize the airline's operations and reduce cancellations. The Minister met with IndiGo CEO Pieter Elbers to discuss the issue.

Naidu noted that the airline has been instructed to comply with all Ministry directives, including fare capping and passenger convenience measures. The CEO confirmed that 100 percent of refunds for affected flights have been completed.

Causes of the Chaos

The recent chaos at India's major airports was caused by IndiGo's internal mismanagement of crew rosters, flight schedules, and inadequate communication. A sharp shortage of crew, particularly pilots, due to the introduction of revised Flight Duty Time Limitation (FDTL) norms, also contributed to the issue.

Analyst Views

Despite the challenges, several analysts remain optimistic about IndiGo's long-term growth prospects. HSBC, Morgan Stanley, UBS, and Jefferies have all maintained their 'Buy' calls on the stock, although with reduced target prices.

• HSBC: Target price reduced to Rs 5,977 per share, implying a 20 percent upside potential.
• Morgan Stanley: Target price set at Rs 6,540 per share, implying a 32 percent upside potential.
• UBS: Target price reduced to Rs 6,350 per share, citing increased regulatory oversight as a key risk.
• Jefferies: Target price set at Rs 7,025 per share, noting that the airline will face rising costs from disruptions and higher crew expenses.

JM Financial, on the other hand, has maintained a 'Reduce' call on the stock, citing the potential for higher costs and regulatory actions.

Key Takeaways

• IndiGo's stock has taken a hit due to mass cancellations and government intervention.
• The airline faces challenges in adapting to revised FDTL norms, which may lead to increased costs and regulatory oversight.
• Analysts remain optimistic about IndiGo's long-term growth prospects, despite near-term challenges.

As the situation continues to unfold, investors will be watching closely to see how IndiGo navigates these challenges and whether the airline can return to its growth trajectory.