India’s largest airline’s revenue falls 78%, stock price falls

India’s largest airline IndiGo, which canceled more than 2,500 flights over several days last month, causing widespread disruption, reported a 78% drop in profit in the December quarter and its stock price fell more than 3%.

The company announced its results after the market closed on Thursday and set aside 5.8 billion rupees ($63 million) in compensation for flight disruptions in December.

However, the bigger impact on revenue was due to one-time costs and foreign exchange losses related to the implementation of new labor laws, which together amounted to about Rs 20 billion.

The lack of progress on a U.S.-India trade deal has undermined investor confidence, contributed to capital outflows, and weighed on the rupee, which became Asia’s worst-performing currency last year (down about 5%).

The currency was last trading at 91.52 rupees, and experts predict it will fall further to 92 rupees to the dollar by the end of March, potentially creating further difficulties for currency-exposed companies such as IndiGo.

Jefferies’ Thursday report said the company’s March quarter is “expected to be weak” despite a 10% increase in available seat kilometers (ASK). ASK is an important metric for measuring passenger capacity.

The broker added that passenger revenue per available seat kilometer (PRASK) will “moderate” and cost per available seat kilometer will increase as the airline “continues to add aircraft”.

Jefferies maintained a buy rating on the stock and set a price target of 6,140 rupees per share.

Indian airlines face pressure on both costs and profits, as most airlines derive nearly 65% ​​of their revenue from domestic travel, which passengers pay in Indian rupees, but most of their expenses are paid in dollars.

Mark Martin, founder and CEO of aviation consultancy Martin Consulting, said IndiGo is adding capacity because it needs to grow, but the next six to 12 months will be tough as the rupee weakens and fuel costs are expected to rise further.

He told CNBC that IndiGo may need to fly more international routes to improve its dollar revenue. This was alluded to in the company’s financial results conference, where management said that new seat additions would be concentrated on international flights.

India’s labor reforms that expanded the scope and eligibility of social security benefits for employees also weighed on IndiGo’s earnings as it recognized a one-time charge of Rs 9.7 billion.

Several major Indian companies, including Tata Consultancy Services and ICICI Bank, reported a temporary hit to their profits due to labor reforms in the December quarter.

In November, the Indian government announced reforms that would consolidate 29 separate labor laws into four comprehensive statutes, walking a tightrope between balancing corporate profits and employee welfare.

Under these provisions, fixed-term or contract employees will be eligible for benefits available to permanent employees, such as vacation, medical care, and social security.

But this was not the only government regulatory change that affected Indigo last quarter.

Last November, the government introduced flight time limit standards, requiring airlines to reduce late-night flights and extend crew rest periods from 36 to 48 hours.

IndiGo canceled thousands of flights in the first week of December citing changes in its pilot rest policy. Indigo CEO Peter Elbers said early December was “the most difficult few weeks” in Indigo’s history.

The Directorate General of Civil Aviation of India last week ordered the airline to pay a penalty of 222 million rupees in connection with the flight suspension, which is part of a one-time provision.

Elbers, who had come under fire following the December disruptions, said IndiGo was currently operating 2,100 to 2,200 flights daily, adding that the company would be able to comply with the government’s flight duty limit norms by February.

Indigo served 124 million customers in 2025, an increase of 9% year-on-year, according to a company statement.