IndiGo Faces Major Near-Term Financial Hit; Reputation Damage, High Scrutiny Key Challenges: ICRA
ICRA cautions that profitability for FY26 will remain under pressure, not only from operational disruptions but also from the depreciation of the Indian rupee against dollar.
Interglobe Aviation Ltd's ability to restore brand loyalty will be critical after operational disruptions caused by the revised flight duty time limitations, even as the airline faces a major near-term financial hit, according to ICRA.
The rating agency said IndiGo's near-term financial performance will be significantly impacted by revenue loss from cancellations, refunds, higher operating costs to compensate affected passengers, and potential penalties following an ongoing regulatory inquiry. The reputational damage from inconvenience caused to travellers and heightened regulatory and media scrutiny adds to the challenge.
ICRA, however, expects the medium-term credit impact of the disruption to be largely manageable, supported by IndiGo's dominant market position and strong liquidity. The airline commands about 65% share in domestic passenger traffic, which, along with its competitive pricing and long-standing record of reliability, should help mitigate sustained defection of travellers to rivals once operations normalise.
IndiGo was affected by the revised FDTL norms due to its high aircraft utilisation and extensive nighttime operations, which left limited operational buffers compared to peers.
The implementation of new rules on night-duty caps and pilot rest stretched IndiGo’s resources, forcing a network reboot and roster overhaul. While the Directorate General of Civil Aviation has granted temporary relief on compliance with Phase II night-duty norms until Feb. 10, 2026, the airline continues to bear heavy financial and reputational costs.
ICRA cautioned that profitability for financial year 2026 will remain under pressure, not only from operational disruptions but also from the depreciation of the Indian rupee against the US dollar.
The agency expects IndiGo’s financial leverage to breach its negative trigger of 2.5x in fiscal year 2026, though it does not anticipate the breach persisting beyond the next fiscal.
ICRA highlighted IndiGo's strong balance sheet and liquidity buffer of around Rs 38,500 crore as on Sept. 30, 2025, which provides significant cushion to absorb near-term earnings pressure and fund investments without raising new debt.
The agency will monitor the pace of operational recovery, cost implications of new norms, ability to pass on incremental expenses to travellers, and continuity of senior leadership amid the DGCA's show-cause notices to IndiGo.
