IndiGo flight cancellation: Use fall to buy for the long term, say analysts

IndiGo share price has corrected sharply amid mass flight cancellations. Analysts say the dip may offer a long-term entry opportunity despite near-term volatility

IndiGo flight cancellations: The recent decline in IndiGo's share price amid massive flight cancellations could be a good entry opportunity for long-term investors, analysts said on Friday.

 

Though the stock may remain volatile in the near-term till flight operations of the airline normalise on a durable basis, analysts believe the counter remains a "structural long-term bet" on India's growing aviation story.

 

"Despite the near-term operational crisis, IndiGo's long-term outlook remains intact as it is a long-term compounding story supported by disciplined low-cost model, India market dominance, strategic expansion, healthy balance sheet, and robust long-term growth prospects. New investors may use the dip to enter the stock," said Narendra Solanki, head of fundamental research (investment services) at Anand Rathi Shares and Stock Brokers.

 

 

Besides, if someone bought the stock at a price higher than the current market price, he/she may increase the exposure to average their purchasing cost, Solanki said.

 

The brokerage initiated coverage on IndiGo stock in October with a 'Buy' rating and a target price of ₹7,000.

 

On the bourses, IndiGo shares have slipped 10.7 per cent so far in December as against a 0.1 per cent dip in the benchmark BSE Sensex index. 

 

IndiGoShare Price Fall: IndiGo flight cancellations

 

IndiGo airline, India's biggest airline by market share, has cancelled over 1,000 flights over the past few days due to a multitude of "unforeseen operational challenges" including minor technology glitches, schedule changes linked to the winter season, adverse weather conditions, increased congestion in the aviation system, and the implementation of crew rostering rules (Flight Duty Time Limitations), as per the airline.

 

The airline also told DGCA, on Thursday, that it will cut flights from December 8 to reduce the ongoing disruptions and would restore full and stable operations by February 10, 2026.

 

It sought around two months’ exemption from one of FDTL rules that limited the number of night landings by pilots. DGCA, however, has only withdrawn a rule that barred airlines from substituting weekly rest with leave. The relaxation is effective immediately.

 

Earnings impact

 

Analysts believe IndiGo's third quarter (Q3FY26) earnings will likely witness the impact of the recent disruptions. That apart, analysts expect the airline’s employee costs rising going ahead due to increased pilots and cabin crew hiring.

 

Given the size of the airline and the market share they hold, the management, said Gaurang Shah, head investment strategist, Geojit Investments,  should have seen this coming and increased hiring earlier. "Financially, the airline's October-December quarter (Q3FY26) earnings may be hit due to the cancellations," he said adding: "The stock, meanwhile, will continue to witness near-term pressure till the operations are normalized."

 

Analysts at Morgan Stanley, too, have cut IndiGo's Ebitda (earnings before interest, tax, depreciation, and amortisation) estimates by 1-4 per cent between FY26-28, saying that better yields from its services were unable to fully offset higher staff and management costs.

 

Given this, it has also trimmed the stock's earnings per share (EPS) estimate by 20 per cent each for FY27 and FY28 on the back of higher depreciation and finance costs.

 

On the valuation front, the brokerage has cut IndiGo's share price target to ₹6,540 from ₹6,698 per share.

 

Shah of Geojit, too, cautions against higher employee costs ahead, but expects the airline's operational efficiencies to offset the impact.

 

"Historically, IndiGo has been able to manage its finances. It also has a decent aircraft order book, which may improve its capacity and, somewhat, offset the cost pressure," he said.

 

Investors, thus, may look at investing in the stock in a "staggered manner" and buy the dip from a long-term perspective.