IndiGo Sees Buy Ratings Despite Q1 Loss on Fuel Cost Surge

Brokerages remained positive on InterGlobe Aviation, the parent of IndiGo, after the airline's June-quarter earnings missed expectations, with analysts attributing the weak performance largely to an unprecedented spike in fuel costs and foreign exchange headwinds rather than any slowdown in demand.

IndiGo reported a standalone net loss of ₹382 crore for the quarter ended June 30, compared with a profit of ₹2,161 crore in the year-ago period.

Revenue from operations, however, rose 20% year-on-year to ₹24,584 crore, aided by higher ticket prices and fuel surcharges.

Aircraft fuel expenses surged 86% to ₹10,830 crore, weighing heavily on profitability. The airline also cited adverse currency movements and disruptions linked to the Middle East conflict as key reasons for the weaker earnings.

Fuel Costs Drove The Earnings Miss

Motilal Oswal Financial Services said IndiGo's operating performance fell short of expectations as fuel costs accounted for 44.1% of revenue, well above its estimates.

Even so, the brokerage highlighted that passenger yields climbed 21% year-on-year to ₹6 per passenger kilometre, reflecting the airline's ability to pass on higher costs through fares.

It retained its 'Buy' rating with a target price of ₹6,580 despite lowering its FY27 operating profit estimates because of higher crude oil prices.

Elara Capital echoed a similar assessment, saying the earnings miss was "entirely cost or forex-led, and not demand or airfare-driven".

The brokerage noted that revenue trends remained strong, supported by higher fares and resilient passenger demand, while soaring fuel prices, rupee depreciation and elevated operating costs eroded margins.

It maintained a 'Buy' rating with a target price of ₹6,020, although it trimmed FY27 earnings estimates to reflect higher fuel costs and a weaker rupee.

Pricing Power And Demand Remain Key Positives

Both brokerages pointed to management's guidance of more than 25% year-on-year growth in passenger revenue per available seat kilometre (PRASK) for the September quarter as evidence that pricing discipline remains intact despite seasonal weakness.

Motilal Oswal expects capacity growth to accelerate once aircraft utilisation normalises, while Elara believes constrained industry capacity and sustained fare strength should continue to support profitability over the medium term.

However, both cautioned that fuel prices, currency movements and geopolitical developments remain the biggest risks to near-term earnings.

The share price of Interglobe Aviation fell to ₹4,899.50 in the early trade on Friday. The shares opened lower from previous close of ₹5,023.