Kotak mentioned that recent data points reflect the impact of IndiGo’s capacity cuts, which appear to be happening at a slightly faster pace than its key peer. “We would not take this as a sign of weakening demand,” the brokerage said.
Operational trends– Flight data up to August 17 shows a modest 1.5% YoY increase in July, followed by a 1.6% YoY decline in August.
– Aircraft induction has slowed to fewer than two per month, versus prior guidance of one per week.
– IndiGo’s market share has also dipped in MTD August.
IndiGo has lowered its average monthly flight count to about 2,000 in these months, down 11% and 9% versus Q4FY25 and Q1FY26 levels, respectively. For comparison, Air India’s reductions stood at 10% and 8%.
According to Kotak, the airline is phasing out damp leases and possibly deferring new aircraft deliveries in what is typically a loss-making quarter. Unlike its past strategy of adding capacity in Q2 ahead of a strong Q3 and Q4, IndiGo is now using these levers to support yield growth in the festive season.
Yield dynamics
Kotak said airlines are looking to avoid making low yields the new benchmark, especially at a time when most carriers are loss-making.Yields have remained flat for three years despite falling crude prices, which the brokerage described as a “commendable feat”. It expects carriers to push for YoY yield growth in the upcoming festive season.
Indigo vs Air India
IndiGo continues to strengthen its cost leadership, widening the gap with Air India. Kotak’s analysis of Singapore Airlines’ results, which consolidate Air India, indicates a meaningful rise in Air India’s losses even in the seasonally strong Q1.
The brokerage attributed this to Air India’s higher costs (Pakistan airspace ban, expensive short-term leases) and IndiGo’s improving load factors, supported by stronger customer preference and network reach.
Interestingly, Air India’s load factors in MTD August have, for the first time in a while, surpassed IndiGo’s. Kotak said early signs point to Air India testing higher ticket prices, making its pricing strategy the key variable to watch.
Q1 earnings miss
For the June quarter, IndiGo reported a net profit of ₹2,176 crore, down 20.2% from ₹2,728 crore a year earlier and below CNBC-TV18’s estimate of ₹2,484 crore. Revenue rose 4.7% YoY to ₹20,496 crore, but again fell short of the expected ₹21,150 crore.
EBITDA increased marginally by 1% YoY to ₹5,226 crore versus the estimate of ₹5,455 crore, while operating margin slipped to 25.5% from 26.4% a year ago, slightly under the 25.7% consensus estimate.
Of the 25 analysts that have coverage on Interglobe Aviation, 20 of them have a ‘Buy’ rating, three have a ‘Hold’ rating, while two analysts have a ‘Sell’ rating.
Shares of IndiGo ended with gains of 1.64% on Wednesday at ₹6,155. The stock has risen 34% so far in 2025.
