IndiGo Reports Rs 2,582 Crore Loss in Q2 FY26 Amidst Capacity Cuts; Outlook Positive with International Growth Focus

InterGlobe Aviation, operating as IndiGo, posted a significant loss of Rs 2,582 crore for the second quarter of fiscal year 2026. This downturn was largely attributed to the depreciation of the Indian rupee against the US dollar and operational challenges, including capacity cuts stemming from the closure of a runway at Delhi airport. These factors led to a substantial contraction in the company's EBITDAR margin.

The company's management has provided a revised outlook for FY26, forecasting an early single-digit percentage increase in CASK (Cost Per Available Seat Excluding Fuel and Forex) due to currency headwinds, higher aircraft on ground (AOGs), and damp leases. Crucially, IndiGo expects high double-digit capacity growth in Q3 FY26, which is anticipated to drive growth in the Indian aviation sector. While significant capacity is being added, Passenger Revenue Per Available Seat Kilometre (PRASK) and yields are projected to remain stable to slightly higher year-on-year. The recent drop in oil prices is expected to offer some relief to profitability.

The issue of grounded A320neo aircraft, linked to Pratt & Whitney engine problems, remains a concern. While the number of grounded planes stabilized in the 40s during Q2 FY25 and is expected to stay within a similar range until year-end, significant improvements are not anticipated soon, despite ongoing discussions with the Original Equipment Manufacturer (OEM). IndiGo continues to receive new aircraft at a rate of one per week.

IndiGo is actively expanding its network, launching new routes from Ghaziabad airport, strengthening regional presence in Punjab and Bihar, and introducing longer-haul international flights to Athens, Guangzhou, and Phuket. Further fleet expansion includes the introduction of the Airbus A321 XR and a doubling of the Airbus A350 order to 60 aircraft. Partnerships, like the one with Aegean Airlines, aim to enhance connectivity. International routes are projected to grow from 30% to 40% of Available Seat Kilometres (ASK), driven by high-yield potential.

The company plans to invest approximately Rs 1000 crore over the next three to four years to establish a world-class Maintenance, Repair, and Overhaul (MRO) facility in Bengaluru, catering to both narrow-body and wide-body aircraft. This initiative aims to boost operational efficiency and reduce costs.

IndiGo's shares are trading at a projected FY28 EV/EBITDAR of 8.1 times, which is considered a reasonable valuation for the market leader with strong growth potential. Analysts recommend accumulating the stock, citing upside from international expansion and expected strong demand during the festive season in H2 FY26.

Potential risks include a downturn in demand, a lack of business travel recovery, and a resurgence in oil prices, which could negatively impact operating profitability.

Impact This news is highly significant for the Indian aviation sector and investors monitoring it, as IndiGo is the market leader and its performance often reflects broader industry trends. Rating: 8/10.

Terms EBITDAR: Earnings Before Interest, Taxes, Depreciation, Amortisation, and Rental. A measure of a company's operating performance. CASK: Cost Per Available Seat Excluding Fuel and Forex. It represents the cost of operating one seat for one kilometre, excluding fuel and foreign exchange costs. AOGs: Aircraft On Ground. Refers to aircraft that are temporarily out of service due to maintenance or technical issues. PRASK: Passenger Revenue Per Available Seat Kilometre. Measures the revenue generated per seat kilometre flown. OEM: Original Equipment Manufacturer. The company that originally manufactured the product (in this case, aircraft engines). MRO: Maintenance, Repair, and Overhaul. Services related to maintaining and repairing aircraft. EV/EBITDAR: Enterprise Value to Earnings Before Interest, Taxes, Depreciation, Amortisation, and Rental. A valuation metric used for airlines and other capital-intensive businesses.