Aviation Profit Dive Expected as Demand Woes Hit IndiGo, SpiceJet

Aviation Sector Faces Profit Squeeze

InterGlobe Aviation Limited, the operator of IndiGo, is poised to report a significant drop in net profit for the third quarter of fiscal year 2026. Concurrently, rival SpiceJet is expected to post a substantially increased loss for the same period. Elara Capital attributed these projections to concerns over softening demand and a general decline in airfares during the quarter.

Demand Indicators Signal Trouble

The broader aviation industry experienced a 1 per cent year-on-year decrease in average airfares during Q3FY26. While October saw a 5 per cent improvement, November and December registered declines of 3 per cent and 2 per cent, respectively. This trend points to underlying demand-side issues affecting airline revenue generation.

Domestic air traffic growth decelerated sharply to 3 per cent year-on-year in Q3FY26, a stark contrast to the 9 per cent growth seen in the prior year's comparable quarter. Elara Capital highlighted the shrinking fleet size among non-IndiGo carriers and flight disruptions as primary contributors to this slowdown.

IndiGo's Q3FY26 Outlook

For IndiGo, Elara Capital anticipates a 45.7 per cent year-on-year decline in adjusted net profit, estimating it at ₹2,121.8 crore. This compares unfavorably to the ₹3,905.2 crore profit recorded in Q3FY25. Earnings Before Interest, Taxes, Depreciation, and Amortisation (Ebitda) are projected to fall 17.9 per cent to ₹5,447.1 crore, driven by lower fares and escalating operational costs.

Despite sequential increases in domestic airfares, the brokerage noted a 20 per cent sequential drop in international airfares during the December quarter due to seasonality. IndiGo's operational efficiency may be bolstered by its fleet of aircraft equipped with Pratt & Whitney engines, potentially reducing leasing expenses. The airline also received 20 new aircraft deliveries during the period.

Elara Capital revised its Ebitda estimates downwards by 14 per cent for the current fiscal year and by 12 per cent and 7 per cent for FY27 and FY28, respectively. Factors such as high crew costs and operational disruptions are expected to continue pressuring profitability. The passenger load factor is forecast at 86 per cent for Q3FY26, a slight dip from the previous quarter, and a forex loss of ₹1,200 crore is anticipated. Revenue is projected to rise 3 per cent to ₹22,783.8 crore.

SpiceJet's Widening Losses

SpiceJet faces a more challenging outlook. Elara Capital projects a net loss of ₹1,420 crore for the December quarter, a significant escalation from the ₹130.6 crore loss in the year-ago period. The airline's Ebitda is also expected to decline to ₹536 crore from a loss of ₹828 crore in the same quarter last year.