IndiGo's higher fares are not yet enough to pay for its fleet

IndiGo charged its passengers far more in the September 2026 quarter and it showed: sales rose 25.9% on roughly the same amount of flying, and operating margin climbed to 8.2% from 3.1% a year ago, though the company said that, excluding mark-to-market and hedging effects, its EBITDA margin fell by 5 percentage points, largely because of fuel and cost increases. The airline still lost ₹1,879 crore. The gap between those two facts is the story of where IndiGo now stands.

The revenue side did what management said it would. In July the company guided that revenue per seat-kilometre flown from passenger tickets would grow by more than 25%; it grew 31%. With fuel expensive, the airline held its flying flat and charged more, and fares beat the guide, but, as the CFO put it, "it did not fully offset the abnormally elevated costs."

What fares have not yet paid for is the fleet. An airline pays for its aircraft, many of them leased, through depreciation and interest rather than through fuel or salaries, and those two lines took about a fifth of sales last quarter. Operating profit, the money left after running the airline but before those charges, covered about 40% of them, calculated from the reported figures, up from about 14% a year ago; the rise reflects a much smaller currency mark-to-market loss than a year earlier, not better underlying flying.

The recovery also looks better than it is: the year-earlier quarter carried a far larger currency mark-to-market loss. Two years ago the same season produced a wider operating margin than last quarter did. And the smaller net loss owes more to currency than to flying. The reported loss was smaller than a year ago, but the company said that, stripping out mark-to-market and hedging effects, the quarter swung from a profit of about ₹100 crore to a loss of about ₹700 crore. A weaker rupee raises what IndiGo pays for anything priced in dollars, from leases to maintenance.

The costs that are not fuel are where the guidance has moved up. In January management guided that this unit cost would rise by a mid-single digit percentage for the previous financial year. In May it said mid- to high single digits for the coming quarters, and in July the higher side of single digits and possibly early double digits. The quarter before came in 11% higher, and last quarter, the company said, about 15% higher. The October guide, high single digits to early double digits for the full year, repeats July's range and sits below the pace of the two quarters so far.

Management blames a rupee that has lost value against the dollar and fixed costs spread over fewer flights, and expects the under-used fleet to be fixed as flying picks up in the second half: "So the utilization will catch up is what we're expecting," said Kiran Thadimarri, the chief financial officer. That route sits awkwardly with the rest of the outlook. Full-year capacity growth, guided in July at single digits, is now early single digits, and the leased wide-body jets that flew long-haul routes stop on 1 November. More of the cost cure therefore depends on fares holding up in the busier winter quarter.

The losses have already worn down the cushion beneath the business. Shareholders' equity fell to ₹4,996 crore at the end of last quarter from ₹9,368 crore in March 2025, against borrowings, which include aircraft lease obligations, of ₹87,303 crore. The company said its free cash remains large, so liquidity is not the immediate issue. Over the last four quarters the airline lost ₹4,105 crore in all, and until its strong seasons earn more than its weak ones lose, equity keeps shrinking.