InterGlobe Aviation Limited (INDIGO.BO) Earnings Call Transcript & Summary

Good evening, ladies and gentlemen, and welcome to IndiGo's Conference Call to discuss the third quarter of fiscal year 2026 financial results. My name is Nirav, and I'll be your coordinator. [Operator Instructions]. As a reminder, today's conference call is being recorded. I would now like to turn the call over to your moderator, Ms. Richa Chhabra, Head of Investor Relations at IndiGo. Thank you, and over to you, ma'am.

Good evening, everyone, and thank you for joining us for the Third Quarter of Fiscal Year 2026 Earnings Call. We have with us our Chief Executive Officer, Pieter Elbers; and our Chief Financial Officer, Gaurav Negi, to discuss the financial performance and are available for the Q&A session. Please note that today's discussion may contain certain statements on our business or financials, which may be construed as forward-looking. Our actual results may be materially different from these forward-looking statements. Also, we have a few one-off items in our third quarter results, which have been reported under exceptional items header. We will discuss these items today. You can also refer to our press release and investor presentation published this afternoon for more information. The information provided on this call is as of today's date, and we undertake no obligation to update the information subsequently. We will upload the transcript of prepared remarks by day end. The transcript of the Q&A session will be uploaded subsequently. With this, let me hand over the call to Pieter Elbers.

Thank you, Richa. Good evening, ladies and gentlemen. As this marks our first interaction in the new year, I would like to extend my warm wishes for a very happy New Year 2026 to all of you. Thank you for joining today's call. Earlier today, we have announced our financial results for the third quarter of financial year 2026. The quarter opened with the industry rebounding after a seasonally weak second quarter when Indian carriers had reduced capacity to align with softer demand trends. October marked a period of capacity addition ahead of the festive and wedding season. This accelerated addition continued through November, leading to strong capacity growth across the market, supported by strong passenger demand and high load factors, signaling solid underlying momentum as we moved into the peak travel period. However, as you are aware, early December, we experienced operational disruptions that weighted on our performance. I will address this in detail shortly. During the quarter, we served nearly 32 million customers, with festive period delivering record heights and our busiest days crossing 3.8 lakh customers. For the full calendar year 2025, we had the privilege of serving around 124 million customers, 12.4 crores, a 9% increase on a year-over-year basis. For the quarter ahead, December '25, we reported -- sorry, for the quarter ended December 2025, we reported a total income of INR 245 billion, around 7% increase year-over-year. And for the full calendar year 2025, we reported a total income of INR 888 billion, around 12% increase on a year-over-year basis. Profit after tax for the quarter stood at INR 5,491 million or roughly INR 549 crores. Profit, excluding impact of exceptional items and currency movement stood at INR 31,306 million compared to INR 38,461 million during the same year. Now I want to address the operational disruptions that began in the first week of December and that led to cancellations of more than 2,500 flights and delays of hundreds of flights during the period of 3 to the 5th of December. As an airline that has prioritized reliability over 19 years, we recognize that the event fell short of the standards we have set for ourselves and our customers. And on behalf of everyone at IndiGo, we deeply regret the inconvenience caused to our customers during this period. From the outset of the disruptions, our focus was first to support the impacted customers. And to minimize passenger inconvenience, we rapidly mobilized teams across airports and significantly expanded our customer service capacity. Our AOCS customer support, OCC teams, ground staff and others worked literally around the clock to ensure we were able to restore operations to normal levels within a very short period of time. Post normalized operations, we scaled back to swiftly operate around 2,100 to 2,200 daily flights. NPS was back to normal levels, and we rebounded back to 3.8 lakh customers every day. We are thankful to our customers, our employees, the government, aviation authorities and all other parties in the Indian aviation ecosystem for their support in helping us to turn around our operations. We have processed timely refunds of all the impacted customers. And further, as a gesture of care, we have also extended travel vouchers to lakhs of severely impacted and stranded customers in addition to regulatory compensation. We're in the process of conducting an in-depth review of the robustness and resilience of our internal processes to ensure we emerge stronger out of the event. Additionally, we have strengthened some of our internal processes and preparing thoroughly for the transition to the revised FDTL norms in February. Now to update you on our new introduction. Recently, we proudly introduced India's very first Airbus 321XLR, a milestone for IndiGo and for Indian aviation industry. The aircraft has dual-class cabin with 12 IndiGo Stretch seats and 183 economy seats, offering greater seat pitch than our current narrow-body fleet for enhanced comfort on long-haul flights. For the first time, IndiGo customers will enjoy hot meals on board with ovens, charging points at every seat and thoughtfully designed interiors that make the 7- to 8-hour journey seamless. Tomorrow itself, we will commence our operations and our Mumbai-Athens route followed by Delhi-Athens the day after. On the 25th of December, we were honored to be the very first airline to begin operations at Navi Mumbai International Airport. We have started with around 15 daily flights to key cities, and we'll continue to expand our presence in the months ahead, including adding international routes. We had launched our business class product, Stretch, in November of '24 and have received a very positive response during the first year. Currently, we're operating Stretch on 8 domestic and 9 international routes. Building on the positive response received for our Stretch product, we're expanding it to a total of 65 aircraft, enabling wider network options for business and premium customers. Another important milestone this quarter was the rapid scale-up of our BluChip loyalty program, which has now reached around 10 million customers. This is a significant step forward in our customer engagement journey. BluChip helps us to deepen relationships with our frequent travelers and understand their preferences better. While early December saw one of the most challenging weeks in our company history. It's also important that this event does not solely define our journey as an airline and our track record. Over the past 19-plus years, we have built a track record of scale, strong operational performance and service that speaks for itself. During the calendar year 2025, so that includes the December month, we delivered one of the highest OTP levels amongst the top 20 global airlines. Today, IndiGo employs more than 68,000 dedicated professionals and have served over 850 million customers since inception, all while maintaining robust operational performance. This legacy of trust remains the very foundation on which we'll continue to improve and serve our customers. While every crisis is unique, the lesson from this event will enable us to strengthen our systems and take certain long-term measures to enhance operational resilience. IndiGo was built on the values of reliability, accessibility, discipline and customer focus. This moment is an opportunity to reflect, learn and rebuild stronger. We continue to serve India that -- with the same focus that built this very airline. Thank you. Let me now hand over the call to Gaurav to discuss the financial performance in more detail.

Thank you, Pieter, and good evening, everyone. For the quarter ended December 2025, on a consolidated basis, we delivered total income of INR 245 billion, up over 6.7% year-over-year despite the operational disruption we faced in early December. In terms of profitability, EBITDAR came in at INR 60 billion, broadly similar to EBITDAR during the same quarter last year. We reported a net profit after tax of INR 5.5 billion with over 2% profit margin compared to INR 24 billion in the same quarter last year. As you're aware, the rupee has depreciated significantly in the past 12 months by around 5%. Rupee depreciation -- depreciated by more than 1% at the third quarter end as compared to the second quarter end, leading to a ForEx loss net of hedging of INR 10.4 billion on our dollar-based net future obligations of around $10 billion. Further, this quarter saw impacts of one-off items reflected under exceptional items on the reported profitability. During the quarter, the Government of India has consolidated multiple existing labor legislations into unified framework, comprising 4 new labor codes. These legislative changes have revised the definition of wages for the purposes of computation of employee benefits and expanded the scope of eligibility of certain employees related social security benefits, such as gratuity and compensated absence. We have evaluated the incremental impact arising from the implementation of the new labor codes. Based on our current estimates, we have recognized an estimated provision of INR 9.7 billion towards the implementation of these new labor laws. Additionally, the operational disruptions we faced in early December led to significant cancellations and delays leading to customer inconvenience. The company, in accordance with the applicable regulation is compensating the affected customers and in addition, as a gesture of care, also extending travel vouchers to the severely impacted customers. On January 17, 2026, the company received an order from the DGCA, imposing a penalty of INR 222 million in connection with the operational disruptions. While the order is being evaluated by the company, the amount has been provisioned for as an exceptional item. These items, together with the expenses incurred to provide support and assistance to the impacted customers towards accommodation, transportation, meals, et cetera, resulted in a total provision of approximately INR 5.8 billion. The net profit, excluding the impact of the exceptional items and currency depreciation was around INR 31.3 billion as compared to INR 38.5 billion during the same period last year. Based on our revised estimates of profitability for the year, we have adjusted our 9 months current tax provision down by INR 154 crores in this quarter. Further based on assessments of our short-term taxable profits, on a conservative basis, we have reassessed the deferred tax assets and retained it down to INR 252 crores. We have provided our revised capacity guidance on 10th December. Capacity in terms of ASK grew by 11% for the quarter at the upper end of the guided range. In terms of passenger revenue, the quarter started on a strong note with October and November witnessing healthy loads driven by festive seasons. December had the impact of the operational disruptions, cancellations, optimized capacity and then schedule adjustments along with the subdued booking curves. Passenger unit revenue came in at INR 4.51, which is 4.5% lower on a year-over-year basis, in line with our revised guidance. The yield came in at INR 5.33, which is around 2% lower compared to the same period last year and a load factor of around 85%, which is again 2 points lower as compared to the same period last year. Now on the cost side, our fuel CASK has reduced by 3% compared to an increase of around 2% in benchmark Singapore jet fuel prices, primarily driven by benefits of our negotiated rates, changes in fleet mix and increased international network. On a year-over-year basis, CASK ex fuel, ex ForEx came in at INR 2.96, around 2% higher due to annual contractual increases across the line items, inflated dollar-denominated costs due to depreciation of the Indian rupees by 5%, moderation in the capacity growth leading to fixed costs being spread over a slightly lower base of ASKs, and it was partially offset by lower number of damp leases. We are currently estimating mid-single-digit percentage increase in our unit costs, including -- excluding fuel and ForEx for the full year 2026 as compared to the full year 2025. This revised guidance is based on the revised capacity estimations. On the balance sheet side, we ended the December quarter with a capitalized operating lease liability of INR 524.8 billion and a total debt, including the capitalized operating lease liability, of around INR 768.6 billion. Our right-to-use assets at quarter end were INR 551.1 billion. We continue to maintain a strong liquidity as we ended the December quarter with a free cash of INR 369.4 billion and a restricted cash of INR 146.6 billion. Our robust liquidity gives us the flexibility to navigate short-term challenges while investing confidently in the long-term growth. A key part of our strategy is to have significant pool of unencumbered assets, which ensures we have a strong credit profile, ability to respond decisively to market opportunities and manage unforeseen risk without constraint. In addition, it also helps us in mitigating certain portion of our foreign currency exposure. In this direction, we have announced a capital investment of $820 million in GIFT City, entity to be deployed primarily towards acquisition of aviation assets. We have utilized part of such investments towards prepayment of loans of 12 finance lease aircraft, resulting in ownership of these aircraft. We are building a balance sheet that is not only strong today, but capable of supporting scale and ambition of tomorrow. With this transaction, we have a total of 28 owned aircraft at the end of the quarter, and around 20% of our aircraft either owned or finance leased. In terms of the fleet addition in the calendar year 2025, we received deliveries of 57 aircraft from our original order book, 55 A320 aircraft and 2 ATR aircraft. And again, an important milestone in our position -- as it positions us as the largest recipient of Airbus aircraft globally for the second consecutive year, accounting for around 7% of Airbus deliveries worldwide. During the quarter, we inducted a total of 24 aircraft from our original order book, out of which 18 were inducted through our GIFT City entity. In addition, we also inducted 12 aircraft in the form of damp leases, thus adding 36 aircraft on a gross basis. We redelivered 13 aircraft during the quarter, resulting in a total closing fleet of 440 aircraft at the quarter end. Moving on to the forecast for the fourth quarter of the financial year. We are expecting to add capacity of around 10% as compared to the same period last year. This moderation in our capacity growth for the fourth quarter is primarily driven by adjustments related to reduced schedule to align with the regulatory requirements. Further, on the revenue side, basis the trend that we've seen in January, we are estimating an early to mid-single-digit moderation in our unit passenger revenue as compared to a high base of the same quarter last year, which had a very strong tailwind in the form of religious congregation for the Maha Kumbh. As we close, I want to thank our customers, employees and shareholders and other stakeholders for the trust and patience. Over the past 19 years, operational efficiency has been a hallmark, and that legacy guides us as we move forward. We are committed to learn from the experience of operational disruptions and building an operation that is stronger, more resilient and ready for the future. With this, let me hand it back to Richa.

Thank you, Pieter and Gaurav. To answer as many questions as possible, I would like to request that each participant limit themselves to 1 question and 1 brief follow-up question, if needed. And with that, we're ready for the Q&A.

[Operator Instructions]. First question is from the line of Binay from Morgan Stanley.

Just one question. As we move away from the cancellation episode, could you comment how that will impact, A, capacity, like 10% of our winter schedule was cut? When do you expect it back? Do you expect any impact on summer schedule? B, its recurring impact on CASK ex fuel? Like are there any CASK line items, staff or so where you see that FY '27 cost structures could be higher than where we are today? So that is it.

At this point in time, all our focus is to make sure that we have a smooth transition into the month of February, bearing in mind the capacity curtailment, which is there, which all in all is leading to that capacity guidance, which was just shared by Gaurav, for a growth of 10% year-over-year in this fourth quarter. So bearing in mind this curtailment of capacity. And again, all the focus of the teams and the operation is really to make sure that we have that smooth transition. At this point in time, we have not concluded yet our planning for the summer. So I guess giving any number in terms of projected growth numbers or impact numbers would be very premature.

And comments on CASK, any recurring impact of this on CASK?

So Binay, as far as the CASK, like, has been expressed, there is going to be an increase of the CASK given the curtailment on the capacity side. What we are looking at, at least for the short term, to close FY 2026 upwards of mid- to single digits compared to FY 2025. So as we further refine the numbers for 2027, we'll come and communicate. But as of now, the short-term guidance towards FY 2026 is a mid- to single-digit increase on the CASK compared to 2025 financial.

And just to reconfirm, in fact, the impact of the new FTDL norms on the staff expense would already be built in, right? Because you yesterday stated that you are all set to meet these norms on 10th Feb, so it means that the staff cost is already there in your numbers.

That's right.

Next question is from the line of Amyn Pirani from JPMorgan.

My question is actually a continuation on what Binay asked on the CASK ex fuel. Now Gaurav, your guidance during the year has changed, and I mean we appreciate that it is mostly because of exogenous factors based on FX as well as the FTDL norms as it has evolved. So can you give us some color as to when you're giving this latest guidance, what is the kind of FX expectations or expectations on costs that you're building in because it has been a moving target. And like I said, it has been driven by exogenous factors. So it will help us understand as to what you are already building in terms of these things? And how should we think about maybe the next few quarters?

Again, I mean, that's the most difficult part in terms of projecting what the FX impact is going to be. If you see -- if I just go back what the guidance was, when we started the year, the guidance was that we're going to be flattish to FY 2025. So that's how we had started the guidance on the cost side, knowing that we had a bit of a high 2025, given that we had a significant number of damp leases at that particular point. Over the course of the year, then we started to moderate that guidance because the FX started to behave the way it started. So we said that the CASK ex fuel, ex ForEx is going to start. The cost is going to start increasing towards 1 to 2 points higher than what we had guided. Along with that came the headwind that the moderation in our AOGs was not to the same levels. And as a result, we need to bring back damp leases, which, like I mentioned, we brought back more damp leases in this particular quarter also. The headwind on the FX continues to grow on us. So it's becoming difficult. I can't pinpoint a number to say that this is what it's going to be. Average increase that we've seen throughout the year has been a 5% increase in FX. When we started the year, it was more towards a 2% or a 3% increase. That's already gone up. This quarter itself has been a 1% increase in FX. The rupee already is behaving the way it's behaving as you would have seen in the news today also. Large part of that cost is again subject to when you're settling those during the quarter. So very difficult to call that out. But the guidance that we are saying mid- to mid-single-digit increase potentially factors in a reasonable kind of projection on the FX has already been catered to. If there's going to be an abnormal increase, then the unit cost will be even higher. Sorry, I don't have a pinpointed kind of a response, but there are so many variables and moving parts right now that we are dealing with. It's very difficult to kind of call that out. But we'll continue to guide as we get more information.

Sure. Appreciate that. And just a related one, you already put in some exceptional items as far as the labor code is concerned. Are there any recurring costs that we should watch out for? Because I think one is, I think, gratuity related or other things for existing employees. But I think going forward also, there is some changes in the way you need to make these provisions as a percentage of salary. So any recurring kind of impact that we should watch out for? Or there is nothing that you foresee as of now?

So today, what we've done is we've taken the new labor code as an exceptional item. So it's not coming in the cost line items. Going forward, the impact of following the new rules is going to start coming in the employee benefits line items. So this is going to roll over from a catch-up or a true-up of the new rules, which has happened today. Tomorrow, it's all going to be part of the employee benefits line item. So that's where it's going to be kind of transitioning from an exceptional line item into an employee benefits line item related to this new labor code because there's going to be an ongoing impact of truing up based on the number of employees and then the tenure, the actuaries are going to run the models and give us what the number needs to be. So that's going to transition into employee benefits from exceptional. That's one. And then the ongoing annual inflation that you have, part of the contractual terms that you have is going to be part of the cost structure.

Okay. And all that is built in your guidance of CASK ex fuel already, basically?

So like I said, I've just given you a short-term guidance right now. So I'm not giving you anything which is long term. This is just the short-term guidance. So this will start rolling in from April onwards also.

Next question is from the line of Krupashankar from Avendus Spark.

My first question would be on the current situation with pilot shortage. Just wondering if there are adequate wet lease opportunities globally for Indian airlines to meet the demand-supply mismatch.

So at this point in time, we have a couple of damp leases in operation already. So we do have a number of damp leases supporting the network of IndiGo already, and that was decided and implemented already prior to the operational disruption. Some of the challenges we have in terms of AOGs are global supply chain challenges. And with that, there's not an abundance of lease opportunities all across the world. So I think we are good where we are now in the wet leases we have. And these are also not leases you can induct kind of overnight. It requires a proper preparation and paperwork and all the sort of preparation to have planes here. So we focus now on making sure that we have a good matching of the pilot availability and the program being operated, including some additional focus and preparation to make sure that the FDTL in Feb will be implemented smoothly.

One more question was primarily on -- do you see incremental employee costs because of inflationary aspects beyond the short-term guidance what you're doing for? Well, is that something we should probably consider given the fact that historically these cases have resulted in a really strong escalation in employee costs?

So again, Krupa, give us time because we're planning up to March. More important point, like Pieter said, February 10 is going to be the more critical point. We'll address all aspects in terms of how we ensure that we have the right kind of manpower and support to execute to that. So give us more time. I'll not be in a position to answer that question, right?

I think it's -- perhaps, if I may add to that. A lot of work is being done by the teams to restore the operation and you have seen that even in the various communications that after 3 days of disruption, the operation was announced that we would expect back to stability between 10% and 15%. The reality was it was on 8% or 9% already back to a stable operation. We are serving for -- basically after the middle of December, we were back to 3.5 lakh, 3.8 lakh customers every day with an OTP basically, which was actually good at that point in time. So despite the fact that the IROP season has started. So despite the -- all the problems we had in the first week, only focus was on that. And we'll come back to some of the more detailed questions you're rightfully pointing out to go off, but perhaps a bit of understanding for all the focus we had on restoring the operation and making sure that we were dealing with our customers, processing the refunds, having the gesture of care being in place and all the elements leading to that. You see that back in the results with the INR 577 crore as an exceptional item, I think it's good to highlight on the like-for-like reduction of the PAT. There's 3 components which are highlighted in the press release. One is the exceptional implement -- the exceptional item around the implementation of the labor law, the operational disruptions, obviously, INR 577 crore. The labor law is close to INR 1,000 crores. And then there's the FX impact to which Gaurav has already alluded to.

Next question is from the line of Prateek Kumar from Jefferies India.

I have a couple of questions. Firstly, can you discuss how your schedules were adjusted versus what you were thinking on capacity growth of upwards to mid-teens for 3Q and 4Q? Is there new scenario on capacity cuts suggested by the regulator?

There was a filed schedule, and the regulator has told us to cut down on the domestic network for that -- on that file schedule, which we have done. And there's always -- you filed for a season. We had already some months in operation, then there are some operational impact. But that if you add that all together, we come to the 11% of capacity, which we had in Q3, and 10%, which we're now forecasting for the Q4 quarter.

I mean, I was wanting to ask like the schedule adjustment was towards -- I mean, cutting your growth, be like attributable to the new routes, which you would have been planning or I mean the popular metro to metro route, how was it adjusted?

Together with the guidance on the capacity cut, there were some guidances on -- you shouldn't cancel or should not leave certain routes. So we looked at all factors and all sectors. Of course, we try to keep the impact for our customers as limited as possible. So you find sectors where we used to operate 5 a day. They are now back to 4 a day or when we are 3 a day, we're back to 2 a day. And I think a proof of that is that the Navi Mumbai opened on the 25th of December, and we started operation in Navi Mumbai itself. As I mentioned earlier, we have the XLR, which we received at the early part of January, a very big milestone for Indian aviation that will start to operate tomorrow, the first international flight to Europe from Mumbai itself. So we'll -- we took the government order, and we try to minimize the impact on the network coverage, which we have throughout the nation. I think I highlighted that number before, IndiGo has a network covering all the major cities in the country. And if my number is correct, I think we have 97 domestic destinations in operation, 90% of the Indian population lives within 100 kilometers of an IndiGo served airport. So we really try to retain that proposition to our customers, make sure that we have the connectivity in place, that the connectivity remains there. So you'll find it primarily on routes where we had 4, 5 a day and now cutting down to 3 or 4 a day in that network. And that will be also the focus for the Q4, which we have started now. So that's the way we've done it for December, and we continue to liquidate that way for the fourth quarter. How we exactly developed the network for next year, that's another step to be taken. But as I said earlier, we had to climb from the low point of 3rd to 5th December to recovery first, then to stabilization -- actually to stabilization first, recovery, go through IROPs. IROPs is now coming to sort of the end of the line for those on the line -- and those on the call, who live in Delhi, we've all seen quite a challenging past couple of 6 weeks with fog, and not only in Delhi, but also Prayagraj, Amritsar, and a lot of other places, Chandigarh, where we have been confronted with quite foggy situations. I think the teams have done a very good job in helping our customers to the best possible way in these airport closures and low visibility operations. Now we move to Feb, and thereafter, we start to build on the network for the summer.

My other question is, can you elaborate on your pilot hiring plans, which you would have been thinking in October, November last year, basically before the disruption and the core -- the rules, which was already known? Based on the number of aircraft addition also expected in following months and under new flight duty norms, and how that plans have changed post disruption, if at all? And also, if you can tell about how the industry's ability to kind of source pilots from based on number of commercial pilot licenses that are issued in the country annually?

Well, pilot planning is a constant process, which is constantly being reviewed. And as you have seen, even in our operation, be it AOGs, be it other dimensions, it's a process which is constantly being reviewed, whether it's the timing of delivery of XLR, whether it's some of these new rules and regulations in place. So it's a permanent process. I think all the growth over the last couple of years was supported by growth of pilots as well, and we continue that track going forward. And clearly, we have a much longer horizon when it comes to pilot hiring on that. And then you need to link the pilots to the network you're operating and make the connection between those 2 elements. So we continue on that track of consistently reviewing the schedule and hiring as well.

No, my question was, has it changed materially versus what you were thinking in October, November in current scenario?

Again, it's a continuous process, and I don't have the exact thing of last year, October here in front of me. But clearly, it is a continuous process, and we keep focusing on that, on an adequate hiring process.

Mr. Prateek, can I request you to come back for a follow-up question, please. Next question is from the line of Chintan Sheth from Girik Capital.

Yes. So on the DGCA penalty, if you can -- this is -- is it any more -- review is pending, which can result into a higher penalty going forward? Or this is a final reading from the regulator? And nothing incremental likely to come through going forward? If you can elaborate on that.

At this point in time, we have no reason to believe so. We have received the orders. The orders are being evaluated by the Board. I think there has been a press release on that from the company when the orders were received, they have been reviewed, and we have no reason to believe otherwise.

Sure. And second on the FDTL, the 10% guidance which for the 4Q, it implies that we have already adequately prepared ourselves in terms of recruitment and everything and that is factored in our assumptions, right, in terms of pilot availability and roster availability for 4Q?