Passengers are seen amid large crowds and chaotic scenes at the Indira Gandhi International Airport after strict new crew assignment rules triggered widespread delays and cancellations in New Delhi, India, December 5, 2025.
Amarjeet Kumar Singh | Anadolu | Getty Images
India’s largest airline Indigo, which canceled more than 2,500 flights in a matter of days last month, causing massive disruption, reported a 78% drop in profit in the December quarter, sending its shares down more than 3%.
The company, which released its results after the market close on Thursday, made a arrangement of 5.8 billion rupees ($63 million) for compensation following flight disruptions in December.
The biggest impact on its profits, however, came from a one-off charge due to the implementation of the new labor code and foreign exchange losses, together amounting to around 20 billion rupees.
The lack of progress on the U.S.-India trade deal has hurt investor confidence, contributing to capital outflows and weighing on the economy. rupeemaking it the worst-performing currency in Asia last year – down around 5%.
The currency last traded at 91.52 and experts predict it is expected to fall further to the level of 92 rupees per dollar by the end of March, which could cause more problems for foreign exchange-exposed companies, including Indigo.
The March quarter for the airline is “expected to be weaker” despite a 10% increase in available seat kilometers, or ASKs, according to a Jefferies report released Thursday. ASK is a key metric for measuring passenger capacity.
The brokerage added that the airline would experience a “moderation” in passenger revenue per available seat kilometer (PRASK) and an increase in cost per available seat kilometer as the company “continues to add aircraft”.
Jefferies maintains a Buy rating on the stock with a price target of Rs 6,140 per share.
Indian airlines face pressure both in cost and revenue terms, as the majority of airlines derive almost 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 capacity because it needs to grow, but the next 6 to 12 months will be tough as we expect the rupee to continue to weaken and fuel costs to rise, said Mark Martin, founder and CEO of aviation consultancy firm Martin Consulting.
He told CNBC that Indigo may need to fly more international routes to improve its dollar revenue. This was also discussed in the company’s earnings call, with management saying the new seat additions would be focused on international routes.
Labor painsLabor reforms in India, which expanded the scope and eligibility of social security benefits for employees, also weighed on Indigo’s results as it booked one-time charges of Rs 9.7 billion.
Several large Indian companies, such as Tata Consultancy Services and ICICI Bank, reported a one-time drop in profits due to labor reforms in the December quarter.
In November, the Indian government announcement reforms, consolidating 29 separate labor laws into four comprehensive codes, walking a tightrope between corporate interests and employee welfare.
Under these codes, fixed-term or contract employees will now be entitled to benefits offered to permanent workers, including leave, medical care and social security.
However, that’s not the only change in government regulations that impacted Indigo over the past quarter.
In November last year, the government implemented flight time limitation norms under which airlines were required to operate fewer night flights and crew rest time was increased from 36 hours to 48 hours.
During the first week of December, Indigo canceled thousands of flights, blame on changes to the pilot rest policy. Early December was “the most difficult weeks” in Indigo’s history, said Pieter Elbers, Indigo’s chief executive.
Last week, India’s Directorate General of Civil Aviation ordered the airline to pay a penalty of Rs 222 million in connection with the operational disruptions, which is part of the one-time provisions.
Currently, Indigo operates between 2,100 and 2,200 daily flights, said Elbers, who was criticized following the December disruption, adding that the airline will be able to comply with government standards for limiting flight times by February.
Indigo served 124 million customers in 2025, up 9% year-on-year, according to its press release.