New Delhi. It is a shock for any big company to lose market value of Rs 37,000 crore in just one week. Indigo has felt this blow very well. Its shares are continuously falling, and every day it seems as if some new concern is coming to light. An airline that commands the lion’s share of domestic airspace is suddenly caught in an operational storm that becomes too much to handle.
Everything started after the implementation of the new Flight Duty Time Limitations. These rules may seem simple on paper, but in reality IndiGo was not able to adjust its crew schedule so quickly. The shortage of pilots increased and soon daily flights started becoming disrupted. The situation became so bad that more than a thousand flights had to be canceled in a single day. Passengers were stranded at airports across the country.
storm in the stock market
The stock market also reacted immediately to this turmoil. IndiGo shares fell 15% in the last five days, taking the market cap down by Rs 37,000 crore. On Monday also, Indigo shares fell by 8.32% and closed at Rs 4,923.50. It has fallen 15.02% in a week, 11.82% in 1 month and 13.57% in the last 3 months. So far this year, it has given a positive return of 8.11 percent. Whereas if we look at the returns for one year from today, it is also positive (10.17%).
Which brokerage house’s take?
Brokerage houses started downgrading their target prices one by one. UBS said that the company was not properly prepared for this change, so costs would increase further. Nevertheless, he believes that Indigo can remain strong in the long run, because international routes give it some balance.
On the other hand, Investec clearly said that the situation is serious. ATF prices are rising, the dollar is strengthening, and new regulations will require about 20% more pilots per plane. All this together can have a direct impact on profits. On the other hand, Jefferies believes that IndiGo is under pressure from multiple costs, such as operational irregularities, possible fines, and dollar expenses.
Meanwhile, DGCA also showed a strict stance. A notice was sent to CEO Peter Albers asking why such a large level of chaos was not stopped. A reply has been sought within 24 hours, which means the pressure is increasing not only from the market but also from the government.
