Crisis-hit IndiGo will face significant financial damage from loss of revenue due to flight cancellations, refunds and other compensation, said global ratings firm Moody's on Monday, while highlighting that disruptions are credit negative for the country’s largest airline. IndiGo has cancelled around 5,000 flights since last Tuesday due to a severe crew shortage, especially pilots, following revised Flight Duty Time Limitations (FDTL) norms introduced last month. These cancellations stranded thousands of passengers and triggered government intervention.
“Recent flight disruptions underscore significant lapses in planning, oversight and resource management by IndiGo because the new regulations had been known to the industry for more than a year. The airline's lean operations, which provide cost efficiencies in stable times, lacked the resilience needed for this change in regulations, leading to the need for a system-wide reboot that led to the cancellation of around 1,600 flights on 5 December,” said Moody's in a statement.
Aviation regulator DGCA has issued IndiGo a show-cause notice, with possible stern action looming over the airline for the widespread disruption. The ministry of civil aviation (MoCA) has directed IndiGo to process all customer refunds by 7 December without any levies. IndiGo said on Monday that Rs 827 crores has already been refunded, and the rest is under process for cancellations up to 15 December 2025. It added that over 1800 flights will be operated on Monday, about 400-450 fewer than the usual daily number.
IndiGo is already grappling with a weakening rupee, and the recent flight disruptions will add further pressure on the country’s only profitable airline. InterGlobe Aviation, IndiGo’s parent, reported a net loss of Rs 2,582 crore in Q2FY26 due to adverse currency movements on dollar-denominated obligations.
Investors are now reassessing IndiGo’s long-term growth amid concerns over its near-term outlook. The company’s share price crashed nearly 9% on Monday to close at Rs 4,907.50 apiece on the NSE. The stock has plunged 15% in the past five sessions.
Global brokerage Investec maintained its 'Sell' rating on the stock with a price target of Rs 4,040, warning that hopes of a strong third-quarter recovery are diminishing after a weak first half of FY26. It stated that costs are rising sharply for the airline, with ATF prices up 6% quarter-on-quarter and the rupee sliding to 90 per dollar. The subsequent wave of flight cancellations has further eroded expectations of an earnings rebound.
With IndiGo required to fully comply with the updated norms by February 10 2026, the airline may need about 20% more pilots per aircraft, a shift that could raise costs by Rs 0.10 per available seat kilometers (ASK) and, without fare hikes, potentially shave off nearly 25% of profit before tax, stated Investec.
Moody's has also downgraded IndiGo's issuer category score for human capital to 4 from 3, reflecting the adverse impact of slower hiring on the airline's operations. IndiGo's governance issuer category score of 3 for management track record captures the management's lack of judgment and preparedness for the impending regulatory changes.
Although the fundamentals of IndiGo's Baa3 rating remain intact, including its dominant market share, the airline's profitability will be negatively impacted in the current fiscal year ending 31 March 2026, stated Moody's. It added that there will be some reputational damage for IndiGo, which may hurt the company, especially in its code-sharing arrangements.