Wings Under Pressure: Why IndiGo’s Losses Are Widening Despite Higher Revenue

IndiGo’s Q2 FY26 results show a sharp net loss of ₹2,582 crore — more than double last year’s — even as revenue rose 9%. Here’s why India’s largest airline is facing turbulence, what’s driving the loss, and what lies ahead.

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Introduction

The skies may be full, but profits remain elusive for India’s largest airline. InterGlobe Aviation Ltd — better known as IndiGo — reported a significant widening of losses in the second quarter of FY 2025-26. Despite steady passenger growth and rising revenues, cost pressures, foreign exchange losses, and macroeconomic headwinds have clipped the carrier’s wings once again.

The airline industry thrives on volume, efficiency, and precision cost management. When even one of these pillars wobbles, profitability can plummet. IndiGo’s latest quarterly report captures this perfectly: a story of growth overshadowed by uncontrollable expenses and a shifting global environment.

1. The Numbers Tell the Story

In Q2 FY26, IndiGo posted a net loss of around ₹2,582 crore, compared with a loss of about ₹987 crore in the same period last year. Revenue from operations rose by 9.3% year-on-year to approximately ₹18,555 crore, but total expenses surged more sharply — up nearly 18.3% to ₹22,081 crore.

This imbalance between revenue and costs is the key driver behind the loss. The airline also suffered a foreign-exchange loss of nearly ₹2,900 crore, an over tenfold increase from the year-ago period. Such currency shocks, particularly due to the rupee’s weakness against the U.S. dollar, have become a major pain point for Indian carriers that lease aircraft and pay maintenance charges in foreign currency.

In essence, while IndiGo’s operations are growing, its cost base is expanding much faster — and external factors are adding an unpredictable layer of pressure.

2. What’s Driving IndiGo’s Loss?

a) Currency and Dollar-Denominated Costs

A key reason behind IndiGo’s widening loss lies in the volatile exchange rate. The rupee’s depreciation has inflated costs related to aircraft leases, spare parts, and maintenance contracts — all of which are dollar-denominated. These are unavoidable expenditures, meaning even small currency swings can have massive financial implications.

While the airline reported healthy passenger growth, the accounting loss due to forex fluctuations has more than offset these operational gains. In simple terms, the airline’s financials were hurt more by exchange movements than by weak demand.

b) Rising Non-Fuel Operating Costs

Fuel, historically the largest expense for airlines, actually fell by about 10% year-on-year in the quarter to nearly ₹6,000 crore. However, that respite was overshadowed by the jump in other operational expenses, which grew over 30% to ₹16,000 crore.

These include airport charges, staff costs, maintenance, and aircraft lease rentals — all categories that have been trending upward globally. Labour costs are rising as competition for skilled pilots and engineers intensifies. Maintenance and parts have become costlier because of global supply-chain disruptions and inflation.

The fixed-cost nature of the aviation industry magnifies these challenges. Even a modest rise in such expenses can significantly hurt profitability.

c) Higher Cost Per Seat Kilometre

IndiGo’s Cost per Available Seat Kilometre (CASK) — a key efficiency measure — jumped around 10% to ₹5.16. Excluding fuel, it climbed even more steeply by nearly 25% to ₹3.71.

This means that for every seat the airline made available for sale, the cost of operating it went up sharply. Even though the airline carried more passengers, each flight became more expensive to run, eroding margins.

d) Capacity and Demand Trends

During the quarter, IndiGo increased its available capacity (ASK) by about 8%, carrying 28.8 million passengers, up 3.6% from a year earlier. Its load factor, or seat occupancy, stood at a respectable 82.5%.

Yields — or the average fare per passenger per kilometre — improved 3.2%, while revenue per available seat kilometre (RASK) rose about 2.3%. Yet, these modest improvements were not enough to offset soaring operating costs.

Demand has been recovering steadily since the pandemic, but intense competition and limited pricing power have capped fare increases. The domestic market, though expanding, remains highly price-sensitive — meaning airlines often cannot pass on cost increases to passengers.

e) Macroeconomic Pressures

Beyond internal factors, external headwinds have also been at play:

Currency fluctuations have inflated costs across leases and maintenance.
Global inflation has raised the price of inputs and spare parts.
Geopolitical uncertainty affects oil prices and travel sentiment.
Interest rates remain high, raising borrowing and financing costs for carriers.

In a business as capital-intensive as aviation, these macro variables can make the difference between a profitable quarter and a loss-making one.

3. Why It Matters

For IndiGo

A loss of this scale, even as revenue rises, signals that the airline’s cost structure needs rebalancing. IndiGo has built its success on operational efficiency and scale, but that model is being tested by external shocks and structural cost increases.

The company must now focus on improving margins, not just market share. The management will be under pressure to deliver a credible turnaround — balancing growth with profitability, tightening cost controls, and managing foreign-exchange exposure more effectively.

For the Indian Aviation Industry

IndiGo holds nearly two-thirds of India’s domestic aviation market. When its profits tumble, it’s not just a company-specific issue — it reflects broader stress across the sector.

Rising costs, currency volatility, and limited pricing flexibility affect all airlines. Smaller carriers, which lack IndiGo’s scale and financial strength, could find survival even more challenging in such an environment.

A weakening rupee, combined with volatile oil prices, could force the industry into fare hikes or capacity cuts, potentially impacting consumers as well.

For Investors

Investors will closely monitor whether this is a temporary setback or a longer-term trend. Key questions include:

How much of the loss is due to one-time forex shocks versus structural issues?
Can IndiGo sustain its ambitious expansion plans amid profitability concerns?
Will management focus more on yield improvement than volume growth?

The answers will determine investor sentiment toward the stock and, by extension, the broader aviation sector.

For Passengers

While consumers have benefited from competitive ticket prices, the industry’s thinning margins could eventually lead to fare adjustments. Airlines may also re-evaluate less profitable routes, charge more for ancillaries like baggage or meals, or reduce flight frequency on marginal sectors.

In the long run, sustainable profitability is crucial for maintaining service quality, expanding routes, and ensuring a stable flying ecosystem.

4. The Road Ahead

Short-Term Focus Areas

In the next few quarters, IndiGo’s performance will hinge on several critical factors:

Currency Stability – A stronger rupee could immediately ease the burden of lease and maintenance costs.
Fuel Prices – Any uptick in global crude prices will again hit margins.
Load Factor and Yields – Improved occupancy and premium segment focus could help recover some lost ground.
Cost Discipline – Tight control on non-fuel costs such as maintenance and leases will be vital.
Fleet Optimization – Managing the mix of aircraft types and routes could help reduce per-seat costs.

Medium-Term Priorities

Over the next two to three years, IndiGo’s strategic focus is likely to shift toward:

Fleet Modernization: Newer, fuel-efficient aircraft will reduce per-seat operating costs.
International Expansion: Targeting routes with better yields and less competition.
Ancillary Revenues: Increasing income from add-ons such as cargo, seat upgrades, and in-flight sales.
Digital Efficiency: Using data and automation to optimize route planning and resource utilization.
Financial Risk Management: Hedging fuel and forex exposures more effectively to smooth volatility.

If executed well, these initiatives could help restore profitability and strengthen IndiGo’s long-term position.

5. Lessons from IndiGo’s Q2 Turbulence

The airline’s Q2 FY26 performance offers valuable insights — both for the company and the sector:

Scale alone isn’t enough. Growth without cost control can erode profitability rapidly.
Currency risk is real. Global exposure requires proactive hedging and financial discipline.
Fixed costs magnify shocks. In high-capital industries, even small disruptions can cause steep losses.
Operational agility is vital. Airlines must adapt quickly — adjusting routes, pricing, and fleet deployment as market conditions change.
Profitability must take precedence. Investors and management alike need to balance expansion with sustainable margins.

6. The Broader View

Despite the setback, India’s aviation sector retains strong fundamentals. Rising incomes, tourism, and regional connectivity programs continue to drive long-term demand. India is now the world’s third-largest domestic aviation market, and the long-term growth story remains robust.

IndiGo, with its extensive network and market leadership, is still best placed to capitalize on this expansion. The challenge lies in navigating the near-term turbulence — managing external headwinds while staying disciplined on costs and strategy.

In many ways, this quarter serves as a reminder: aviation is a marathon, not a sprint. Success depends not just on filling planes, but on doing so profitably, consistently, and sustainably.

7. Final Thoughts

IndiGo’s widening loss in Q2 FY26 underscores how fragile profitability can be in aviation. Despite carrying more passengers and earning higher revenue, the airline was hit by a confluence of factors — rising non-fuel expenses, currency losses, and limited pricing power.

To regain altitude, IndiGo must pivot from pure growth to smart growth — optimizing costs, managing forex risk, and extracting better value from every seat flown. With prudent management, the airline can recover from this phase, but it will require sharper execution, better cost discipline, and a renewed focus on long-term profitability.

For the aviation industry as a whole, IndiGo’s results act as a wake-up call — to balance ambition with resilience, and to recognize that in today’s volatile environment, efficiency and risk management are as crucial as market share.

Author’s Note

As someone who tracks India’s corporate and aviation sectors closely, I find IndiGo’s Q2 FY26 story both cautionary and instructive. The company still dominates the skies, but its latest numbers show that even giants must stay agile and financially vigilant. My goal here was not to repeat the figures, but to connect them with the forces shaping the aviation landscape — from currency and cost structures to demand cycles and investor sentiment.

Sources

Economic Times – IndiGo Q2 FY26 Results Coverage
Moneycontrol – IndiGo Quarterly Earnings Analysis
Business Standard – IndiGo Financial Highlights
NDTV Profit – Q2 Results Live Updates
The Telegraph – IndiGo Net Loss and Industry Context

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