IndiGo’s stock faced another rough session today, slipping nearly 9% in intraday trade as the airline continued to battle a week-long operational crisis. Global brokerage Morgan Stanley has cut the FY27 and FY28 earnings estimates by 20% though it maintained its Overweight rating. The target price has been cut as well.
A crisis that refuses to settle
The impact on operations has been severe. IndiGo has cancelled over 2,000 flights in six days as per the latest Reuters report. The company says it has already processed refunds worth Rs 610 crore and delivered nearly 3,000 pieces of delayed baggage. Change and cancellation fees have also been waived for travel between December 5 -15.
Let’s take a look at the brokerage house Morgan Stanley say on this and the rationale behind its bullish call
Morgan Stanley on IndiGo: Target cut, concerns rise
Morgan Stanley in its report noted the worsening situation but believes the challenges are not limited to IndiGo. In its words, the carrier is “hitting a rough patch,” but the firm continues to remain positive on long-term prospects.
The brokerage revised its target price to Rs 6,540 from Rs 6,698 , citing rising cost pressures across the industry.
According to the report, “Indigo is seeing rising cost headwinds, but the entire industry will face these and capacity is tight, so we expect air fares to rise gradually as a partial offset.”
The brokerage added that demand isn’t collapsing. As it noted, “Demand trends are improving, with November domestic passengers up 7% year-on-year versus -2% in the second quarter of FY26 (Financial Year 2026).”
Morgan Stanley on IndiGo: FY27, FY28 earnings estimates cut by 20%
The brokerage warned that the real challenge for IndiGo lies in the cost structure. Staff costs made up 8.3% of the company’s profit-and-loss statement in FY25, and pilot salaries are rising due to the new FDTL norms.
Fuel costs and currency movements are adding more stress. The report highlighted that “60% of input costs are directly or indirectly denominated in US dollars,” meaning any fall in the Indian rupee increases expenses sharply.
Jet fuel prices (ATF – Aviation Turbine Fuel) have also risen 10% since December 1, 2025.
Morgan Stanley noted, “We cut our FY27 and FY28 earnings estimates by 20% each as we build in higher cost per available seat kilometre (CASK).”
Morgan Stanley on IndiGo: What triggered the disruptions
Morgan Stanley outlined the chain of issues that created the current mess. The firm pointed to technology glitches, winter schedule changes, bad weather, airport congestion, and the implementation of new Flight Duty Time Limitations (FDTL) norms – rules that regulate pilot working hours.
According to them as “IndiGo is operating the largest winter schedule among domestic airlines this season, domestic departures up 10% year-on-year, the impact has been more visible.”
Morgan Stanley on IndiGo: Why the Overweight rating has been maintained
Despite the near-term pressures, the brokerage has an Overweight rating. Morgan Stanley argues that the aviation sector is entering a period of tight supply, which could support fares. The firm added, “We expect tight industry supply, high cost per available seat kilometre across peers, and rising share of international business to support multiples.”