Can Indigo keep its leadership in the skies – Stock Insights News

Interglobe Aviation, which operates Indigo Airlines, has been continuing its position of strength in the Indian aviation industry. It has increased its domestic market share to 64.3% in March 2025 from 58% in 2022, according to the Directorate General of Civil Aviation (DGCA).

For reference, the Air India group’s market share increased only slightly from 24% to 26.5% in the same period. Akasa Air grabbed a 5% market share from its launch in August 2022. Other airlines have struggled with SpiceJet stifled by capacity constraints, and with Go First’s exit, market share has gone to Indigo, Air India, and Akasa.

The dominance is reflected in its financial performance as well. In the March quarter of 2025, Indigo posted a net profit of Rs 3,073 crore, increasing by 62% from the previous year. This marks an impressive comeback from the September 2024 quarter, when the company posted a loss of Rs 989 crore. In the December quarter, the company posted a net profit of Rs 2442 crore.

It had reported an operating profit margin of 27% compared to 22% in the previous year. Indigo attributed it to improvement in unit passenger revenue and continued favourable fuel environment.

Indigo’s losses in the September quarter were affected by the grounded aircraft due to faulty Pratt and Whitney engines. Indigo had grounded 75 aircraft, or one-fifth of its fleet, in the September quarter. However, that number has now decreased.

Gaurav Negi, Chief Financial Officer of Interglobe Aviation, said the company reached its peak number of groundings in Q2. “The number of Aircraft On Ground (AOG) has been reducing since Q2 from mid 70s to 60s in Q3 to 50s in Q4 and is currently in the 40s”, Negi said in the company’s Q4 earnings call.

Negi said Indigo added 67 aircraft on a net basis in the year to its fleet. This was higher than the previous year’s 58. The company’s fleet has reached 434 by the end of March 2025, making it the first Indian airline to have 400 aircraft in its fleet.

For comparison, the Air India group, which was formed by merging Vistara and Air India along with the merger of AirAsia India and Air India Express, has a total fleet of around 300 aircraft.

Negi added that the company is looking to grow its capacity in terms of Available Seat Kilometers (ASK) in early double digits for the financial year 2026.

Indigo is also looking to add 10 international and 4 domestic destinations in FY26. This will expand its network to 50 overseas and 95 domestic flights.

Indigo has always operated as a low-cost carrier. However, things are changing for the company as it is now offering more premium services.

Indigo had launched Stretch, a business-class aircraft, in 2024. So far, it has the Stretch program in five domestic routes with 16 aircraft. It also launched Stretch for the Delhi-Bangkok route. The business class offerings will make the company’s flights attractive to premium customers, and the company will position itself alongside the Air India group’s business class offerings.

Moreover, Indigo is also adding more international flights to its roster. Indigo signed an agreement to damp-lease six wide-body 787s with Norse Atlantic Airways. It has already deployed the first 787s on the Delhi-Bangkok flight.

When an airline damp leases an aircraft, the lessor airline provides the aircraft and maintenance while the lessee (the airline that is leasing the aircraft), which is Indigo in this case, supplies the crew.

The company is also planning to operate Amsterdam and Manchester flights from Mumbai using damp-lease aircraft. Negi said the operations mark an important milestone for the company as it looks to compete on long-haul flights and wide-body operations.

The company’s shift to wide-body operations opened another opportunity for Indigo in terms of cargo shipments. Peter Elbers, CEO of Indigo, said the wide-body 787 flights to Bangkok are seeing cargo weights of 8 to 10 tons per flight, which is larger than the kilos they carried in narrow bodies. Elbers in the earnings call added that there is more opportunity for cargo in terms of the flight operation.

Peter Elbers, the current CEO who joined in 2022, has become an influential figure for the company. According to Motilal Oswal in a May 21 report, the company adopted a different operational strategy after Elber’s joining.

He has more than 30 years of experience working with KLM Royal Dutch Airlines in different positions. The brokerage said his wealth of experience has helped Indigo compete with global companies and also increase its market share in the domestic space.

When Elbers joined Indigo, the company had flights to 25 international destinations. It has now reached 41, making a 65% growth in less than 3 years.

Motilal Oswal said this could become a ‘key man’ risk for the company.

Indigo has gained over 15% in the year so far, outperforming the benchmark index, Nifty 50, which gave a 4% return.

Motilal Oswal maintained a “buy” call with a target price of Rs 6,375, valuing the company at 10 times FY27 EV/EBITDAR. This implies an upside of 19% from the current price. The brokerage noted the company is working towards its key promises with a customer-first approach. Motilal also retained its FY26 and FY27 estimates for the company.

The brokerage said Indigo serves over 10 crore customers and is adding one aircraft per week on average, and expanded its international share to 30% in terms of ASK through strategic partnerships. It is also satisfied with the company’s focus on developing a global presence through loyalty programs and proactive brand building.

Indigo’s efforts to refine schedules to increase reliability and attract a higher share of international passengers are also praiseworthy, according to the brokerage.

Kotak Institutional Equities on May 22 also kept their buy call on Indigo while raising the fair value to Rs 6,700, a 25% upside. Kotak increased profit before tax (PBT) estimates by 5 to 6%, assuming higher yields and ASK.

The brokerage also says the change in profit after tax is higher due to a lower tax assumption, as the company has unabsorbed losses of around Rs 10,000 crore to 11,000 crore. Due to this, the company can offset future losses. This makes the effective tax lower at around 3 to 4% of PBT.

Indigo, despite all its advantages, is not without risk. Motilal Oswal said the stock would have downsides if there were delays in deliveries of wide-body aircraft and AOG. The company’s focus on business class may also backfire, according to the brokerage as the higher premium fleet share could dilute its cost advantages.

If there is volatility in crude or the rupee, it would pressure the company’s margins if it is not passed on.

Recently, the company’s co-founder and promoter, Rakesh Gangwal, and his family trust sold a 5.7 per cent stake in the airline for about Rs 11,559 crore. Gangwal resigned from Indigo in 2022 and said he will gradually sell all his stakes within 5 years.

Indigo is in a great position with its growing international and domestic market share, foray in the business class segment. Though as past shows, things can go out of control with more AOGs or a delay in the delivery of aircraft. Airlines are also at the mercy of fuel prices and sharp swings could disrupt the company’s plans. Its maverick CEO Peter Elbers could also be a key man risk for the company. Investors looking to invest need to make peace with these drawbacks and do their due diligence before investing.

Disclaimer

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Ananthu C U is an equity market journalist who has written about listed companies, equity market regulations, and economic development. He is deeply interested in increasing his knowledge about the equity market, the Indian economy and listed Indian companies. He generally tracks infrastructure, power and financial companies.

Disclosure: The writer and his dependents do not hold the stocks discussed in this article.

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