Passengers are seen amid heavy crowds and chaotic scenes at Indira Gandhi International Airport after stringent new crew-rostering rules triggered widespread delays and cancellations in New Delhi, India, on Dec. 5, 2025.
Amarjeet Kumar Singh | Anadolu | Getty Images
India’s largest airline, Indigo, that cancelled more than 2,500 flights within days last month causing massive disruptions, reported a 78% drop in profit in the December quarter, sending its shares down more than 3%.
The company, which reported results after market close on Thursday, made a provision of 5.8 billion rupees ($63 million) toward compensation following flight disruptions in December.
The larger impact on its earnings, however, was from a one-time charge owed to the implementation of new labor code and forex losses, together amounting to about 20 billion rupees.
The lack of progress on the U.S.-India trade deal has hurt investor confidence, contributing to capital outflows, and has weighed on the rupee, making it Asia’s worst performing currency last year — down about 5%.
The currency was last trading at 91.52 and experts predict it to slip further to 92 rupee per dollar level by end of March, which could spell more trouble for forex-exposed businesses including Indigo.
The March quarter for the airline is “expected to be weaker” despite a 10% rise in available seat kilometers, or ASK, according to a report by Jefferies on Thursday. ASK is a key metric for measuring passenger capacity.
The brokerage added that the airline will see a “moderation” in passenger revenue per available seat kilometer (PRASK) and increase in cost per available seat kilometer as the company “continues to add aircraft.”
Jefferies maintains a buy rating on the stock with a target price of 6,140 rupees per share.
Airlines in India face pressure on both costs and revenue fronts as a majority of the airlines get nearly 65% of their revenue from domestic travel, for which passengers pay in Indian rupees, but most of the costs are in dollars.
Indigo is adding more capacity because they need to grow, but the next 6-12 months will be tough, as we expect the rupee to weaken further and fuel costs to rise, said Mark Martin, founder and CEO of aviation consulting firm Martin Consulting.
He told CNBC that Indigo may need to fly on more international routes to improve its dollar earnings. This was also hinted at in the company’s earnings call, with the management saying that new seat additions will be skewed toward international routes.
Labor pains
Labor reforms in India, which have expanded the scope and eligibility of social security benefits for employees, also weighed on Indigo’s earnings as it recognized one-time charges of 9.7 billion rupees.
Several large Indian companies, such as Tata Consultancy Services and ICICI Bank, have reported a one-time hit on earnings due to the labor reforms during the December quarter.
In November, the Indian government announced reforms, consolidating 29 separate labor laws into four comprehensive codes, walking a tightrope between balancing business interests and employee welfare.
Under these codes, fixed term or contract employees will now qualify for benefits available to permanent workers, including leave, medical, and social security.
However, this was not the only change in government regulation that impacted Indigo during the last quarter.
In November last year, government implemented flight duty time limitation norms under which airlines were mandated to operate fewer late-night flights and rest time for crew was increased from 36 hours to 48 hours.
In the first week of December, Indigo cancelled thousands of flights, blaming it on the changes to the pilot rest policy. Early December was the “the most challenging weeks” in Indigo’s history, said Pieter Elbers, chief executive of the Indigo.
Last week, India’s Directorate General of Civil Aviation ordered the airline to pay a penalty of 222 million rupees in connection with the operational disruptions, which is part of the one-time provisions.
Currently, Indigo is operating 2,100-2,200 daily flights, said Elbers, who had come under fire following the disruption in December, adding that the airline will be able to comply with the government’s flight duty time limitation norms by February.
Indigo served 124 million customers in 2025, up 9% on year, according to its statement.