IndiGo's Q4 PBT could take 10% hit amid West Asia tensions: PL Capital

Amid escalating US-Iran tensions, InterGlobe Aviation (IndiGo) has suspended flight operations to the Middle East due to airspace restrictions. According to PL Capital, this disruption could result in a 10 per cent hit to the airline’s profit before tax (PBT) in a worst-case scenario, should the suspension persist through March 2026.

 

The brokerage maintained a ‘Hold’ rating on IndiGo with a target price of ₹5,186, valuing the stock at 10.5x FY27E Earnings before interest, taxes, depreciation, amortisation, and rent/restructuring costs (Ebitdar).

 

According to the analysis, IndiGo suspended 166 flights on March 1, 162 flights on March 2, and 156 flights on March 3, while 57 flights are impacted on March 4 so far, an evolving figure.

 

Capacity at risk and revenue impact

For Q4FY26, IndiGo has guided for available seat kilometers (ASKM) growth of 10 per cent. Based on this, the brokerage expects ASKM to rise 10.2 per cent year-on-year (Y-o-Y) to 46,375 million. With international ASKM at 28–30 per cent of total capacity and about 40–45 per cent of international capacity deployed to West Asia, the ASKM under stress is pegged at 5,565 million.

 

However, since the disruption started in March, the time-adjusted capacity at risk for the quarter is estimated at 1,836 million ASKM (assuming a one-month impact), said PL Capital. Keeping existing load factor and yield assumptions unchanged, passenger revenue at risk is estimated at ₹841.9 crore.  CHECK Stock Market LIVE Updates

Costs and fuel risk

On costs, PL Capital classified overheads into fixed and variable buckets to estimate the unabsorbed cost impact from lost capacity. Under the worst-case assumption, the unabsorbed fixed cost hit is estimated at ₹273.6 crore for the quarter.

 

The brokerage’s analysis also flags a potential upside risk to costs from fuel, noting that IndiGo’s fuel cost per available seat kilometer (CASK) assumption of ₹1.55 could rise if crude oil prices spiral amid the conflict.

Profit impact and rating

Overall, the brokerage estimates that a time-adjusted capacity loss of around 4 per cent could translate into a ₹841.9 crore revenue miss and ₹273.6 crore of unabsorbed fixed costs, resulting in a 10 per cent downside to its Q4FY26 PBT estimate of ₹2,733.2 crore if the Middle East disruption persists through March.

 

Disclaimer: Views and recommendations are those of the brokerage/analyst and are not endorsements. Readers should exercise discretion.