InterGlobe Aviation is going through difficult times right now. Flight Duty Time Limitation (FDTL) rules had an impact on the airline’s services. The company had to cancel a large number of its flights. Many flights were significantly delayed. Even now the company’s air services have not returned to normal. This has affected the shares of InterGlobe Aviation. The share price has fallen by about 9 percent in a week. The question is whether this is the right opportunity to invest in shares at cheap prices?
Big decline in company’s OTP in two months
InterGlobe Aviation operates approximately 2200-2300 flights daily to 94 domestic and 45 international destinations. There has been a big decline in the on-time performance (OTP) of the company’s flights at major airports in about two months. It was 84 percent in October, which fell to 67 percent in November. In the beginning of December it slipped to 19.7 percent.
Major impact on flights of Mumbai, Bengaluru, Hyderabad, Chennai, Delhi
In November the company had to cancel 1,232 flights. Of these, 755 cancellations were directly related to Crew/FDTL. This month the company has canceled more than 550 domestic and international flights. Its biggest impact has been on airports like Mumbai, Bengaluru, Hyderabad, Chennai and Delhi. This has led to a rise in flight ticket prices. Prices have reached 4-10 times on many routes.
Impact of new rules of DGCA FDTL
The biggest reason for the disruption in the company’s air services is the new rules of DGCA FDTL. Its purpose is to increase safety and reduce fatigue of pilots. These rules were to be implemented in phases. The final phase came into effect from November 1. This has affected the high-frequency, overnight flight model. In the new rules of FDTL, the weekly rest of pilots has been increased to 48 hours. A limit of 2 per week has been fixed for night landing.
Number of flights will be reduced from December 8
Indigo is reducing the number of flights from December 8 to deal with the problem. However, cases of flight cancellations and delays may continue for the next 2-3 days. The company has sought exemption from the rule of reduction in night flying hours till February 10, 2026. The company says that its operations are expected to become normal by then.
Shares fell almost 9 percent in a week
This week the company’s shares have fallen by about 9 percent. The company’s shares had closed at Rs 5,772 on December 1. It closed at Rs 5,367 on December 5. Disruption in the company’s services may continue in the next few weeks i.e. in the short term. The reason for this is that the company will be affected by new regulatory rules and it will have to face shortage of manpower. But, the outlook for the company seems positive in the long term. The management of the company is responsible and the company can change itself according to the new rules.
What should you do?
IndiGo shares appear to be well valued as they are currently trading at 8.1 times FY28 estimated EV/EBITDAR. Investors can increase investment in Indigo shares at the current price. It needs to be kept in mind that despite increase in costs due to increase in the number of international flights, fall in oil prices and strong demand during the festive/wedding season, the company will still benefit.