Less Than 1%: Examining The Financial Impact Of IndiGo's Flight Cancellation

After cancelling a myriad of flights in the span of just two days, IndiGo may have to incur a dent of around Rs 16.9 crore in its operating profit, which accounts for less than 1% of the company's Q3 quarterly profit numbers.

The disruption saw IndiGo cancelling 350 flights, which roughly forms 7-8% of the airline's total daily operations. The carrier operates 2,200 to 2,300 flight daily.

While this number is quite significant, it could be offset through savings in some of the variable expenses.

While a flight cancellation immediately leads to a direct loss in revenue, it also eliminates some of the variable costs involved in operating an aircraft. Therefore, to calculate the true impact of the loss, one must take into account both the revenue loss as well as the variable costs saved.

Now, based on IndiGo's Q3FY25 numbers, the airline had earned a revenue per available seat kilometer (RASK) of Rs 5.44.

However, about 60% of the airline's expenses, such as fuel and airport charges, are variable. With a variable Cost per Available Seat Kilometer (CASK) of Rs 2.9, the net impact on profit is lower than the total revenue lost.

Assuming an average flight configuration of 190 seats flying an average distance of 1,000 kilometres. This would mean a profit impact of roughly Rs 2.5 per unit, or Rs 4.8 lakh per cancelled flight.

If we extrapolate this number across the 350 flights impacted, the aggregate hit on the bottom line stands at around Rs 16.9 crore.

As far as the topline is concerned, the notional loss is significantly higher. Without adjusting the saved costs, the impact of cancelled flights on IndiGo stands at around Rs 36.05 crore.

However, in the broader scheme of things, the impact remains limited. In fact, the Rs 16.9 crore profit hit represents just 0.7% of IndiGo's Q3FY25 reported profit of Rs 2,449 crore.

Similarly, the revenue loss accounts for just 0.16% of the quarter's total revenue of Rs 22,111 crore.