The IndiGo share price has seen sharp losses in morning trade. It is down over 4% intra-day and declined 14% in the last 1 month. However, Motilal Oswal expects 28% upside potential for the stock over the next 12 months, though they have trimmed the target to Rs 5,500 per share. The brokerage firm has retained the ‘Buy’ rating on the stock.
Geopolitical tensions disrupt key routes
The brokerage firm stated that the immediate challenge for IndiGo is not demand, but access. Escalating geopolitical tension, particularly the US-Iran conflict, along with the continued closure of Pakistan’s airspace, has disrupted crucial flight corridors. These restrictions have hit IndiGo’s westbound routes to the Middle East and parts of Europe. The report added that these markets are central to the aviation company’s operations.
The Gulf region alone contributes around 18–20% of the airline’s total revenue, and disruptions here have led to flight cancellations and rerouting. While passenger demand remains healthy, the airline is unable to fully capitalise on it. The uncertainty has also started affecting traveller behaviour, with many delaying bookings, resulting in softer forward demand, the report added.
Rerouting adds time, cost, and complexity
According to the report, with traditional air routes blocked, IndiGo is being forced to take longer paths, especially for European flights. Aircraft are now rerouted via sub-Saharan Africa, adding three to four hours to each journey. The report further noted that apart from being a logistical inconvenience, it also raises the costs for the company.
The report further hinted that longer flying times mean higher fuel consumption, estimated to increase by 6–8% per flight, along with additional crew expenses and tighter operational flexibility. Over time, all these inefficiencies start eating into profits, especially when combined with other external pressures, the report added.
Fuel prices emerge as a major headwind
Brent crude surged to about $113 per barrel in March 2026, pushing aviation turbine fuel prices higher. Fuel already accounts for roughly 30–35% of IndiGo’s cost base, and is now expected to touch around Rs 115 per litre in the fourth quarter of FY26.
The sensitivity is sharp; every $1 increase in crude prices impacts profitability by nearly Rs 360 crore. IndiGo has responded by introducing fuel surcharges ranging from Rs 425 to Rs 2,300, but these measures only partially offset the surge in costs, the report said.
Currency weakness adds another layer of pressure
The report noted that a significant portion of IndiGo’s expenses, including aircraft leases, maintenance, and spare parts, is linked to the US dollar. This makes the airline particularly vulnerable to currency movements, the brokerage firm mentioned.
According to estimates of the brokerage firm, every Re 1 depreciation against the dollar increases annual operating costs by about Rs 900 crore. This also makes things worse because when international flights drop, IndiGo earns less in dollars, which normally helps balance its dollar-based costs, the report noted.
Profit estimates slashed amid multiple headwinds
Given the combined impact of disrupted operations, higher fuel costs, and currency pressures, earnings expectations have been revised downward, as per the brokerage firm. Profit after tax estimates have been cut sharply, by 31% for FY26, 15% for FY27, and 10% for FY28, the report mentioned.
Long-term outlook remains steady
Even as near-term earnings come under pressure, the broader growth narrative for IndiGo remains intact. The brokerage firm noted that the airline’s strong domestic network continues to anchor its business, while its expanding international footprint is expected to improve margins and provide a hedge against currency risks over time.
Over the medium term, revenue is projected to grow at a compound annual rate of around 11%, with adjusted profit expected to rise at about 6% between FY25 and FY28, as per the report.
In short, the brokerage firm stated that IndiGo’s current challenges are because of factors that are out of the company’s control, like geopolitics, fuel prices and currency swings, rather than any weakness in its business model. The report further mentions that while these pressures are likely going to put a dent in the near-term earnings, they won’t do much to change the airline’s structural strengths, which include the dominance in the domestic market, strong demand and the company’s growing international presence.
To conclude, Motilal Oswal is positive that once these external disruptions ease, IndiGo will regain its growth momentum quickly.