IndiGo declines 4% after DGCA asks airline to replace faulty engines

InterGlobe Aviation, parent company of budget carrier IndiGo, slipped 4.2 per cent to Rs 1,389 apiece on the BSE in the early morning deals in Tuesday after aviation regulator Directorate General of Civil Aviation (DGCA) barred the operator from operating Airbus A320 and 321 Neo aircraft having turbine blades built with titanium, which is prone to damage leading to mid-air engine shut down.

At 10:02 AM, the stock was trading 1.6 per cent lower at Rs 1,426.95 per share, as against a 0.45 per cent rise in the S&P BSE Sensex. About 0.8 millino shares have changed hands on the NSE and BSE till the time of writing of this report.

“Every aircraft that is added to the existing fleet should lead to one of those with unmodified engines to be grounded and the new aircraft may be operated on the same schedule as was being operated by the grounded aircraft,” a DGCA statement said.
 

The directive comes on the back of the airline reporting nearly 13 incidents of in-flight shutdowns over the last one year. Last month, DGCA had asked the airline to change engines on 16 of its Airbus A320neos, following three instances of aircraft turning back within a span of 4 days. The regulator has warned the airline the aircraft would have to be grounded if the changes are not completed in the next 15 days. 

In a meeting held on Monday, the regulator found the steps taken by the airline, to replace the faulty engines, "unsatisfactory" and said a large portion of IndiGo’s fleet could be grounded if the carrier fails to meet 31 January, 2020, deadline.

The latest directive could impact around 110 engines, virtually putting a spanner on the expansion plans of IndiGo, according to people aware of the development. At the crux of the problem are engines manufactured by US-based Pratt & Whitney (PW), that have been facing low-pressure turbine issues, main gearbox failure, and engine vibration, resulting in schedule disruptions. The extent of disruption will depend on how fast Pratt & Whitney can deliver the new engines but industry sources suggested that replacing 109 engines will impact IndiGo’s operations for close to a year. READ MORE

As of September 2019, the airline had 89 A320 neos, 129 A320 ceos, 6 A321 neos, and 21 ATRs.