The international brokerage said the ongoing geopolitical conflict could weigh on airlines’ available seat kilometres (ASK) in the near term, while rising crude prices pose an additional risk to earnings. It also noted that weakness in the Indian rupee against the US dollar could create medium-term headwinds for the sector.
UBS expects these factors to begin impacting earnings from Q4FY26, prompting a more conservative near-term valuation. However, the brokerage believes IndiGo’s long-term investment case remains intact, noting that industry downturns have historically favoured efficient players. It added that it will continue to monitor macroeconomic and geopolitical risks, and prolonged stress could potentially lead to a review of its estimates.
IndiGo, the country’s leading airline by market cap, on Wednesday said it cancelled over 500 flights to the Middle East and selected international destinations from February 28 to March 3 due to the evolving airspace restrictions over Iran and other Gulf countries. In a regulatory filing, the airline said that it will continue to closely monitor the revenue environment arising from this situation.
Escalating tensions pose a clear negative for travel and tourism stocks. Flight disruptions, rerouting and cancellations can raise operating costs for airlines, particularly fuel and crew expenses. At the same time, heightened geopolitical uncertainty could dampen travel demand, triggering booking cancellations and slower new reservations, which can pressure revenues and near-term earnings visibility across the sector.
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Indigo Q3 snapshot
The airline reported a sharp 78% year-on-year decline in net profit for the December quarter. It posted a consolidated net profit of Rs 550 crore in Q3FY26, compared with Rs 2,449 crore in the same quarter last year. The steep fall was largely driven by exceptional items, including costs related to the implementation of new labour laws, operational disruptions, and adverse currency movements.
InterGlobe Aviation said that excluding exceptional items, profit for the quarter stood significantly higher. The exceptional charges included Rs 969 crore related to new labour codes, Rs 577 crore due to operational disruptions, and Rs 1,035 crore arising from currency movements linked to dollar-based future obligations. After adjusting for these items, the company reported an underlying net profit of Rs 3,131 crore, while profit after tax (PAT), excluding all exceptional and forex impacts, stood at Rs 3,846 crore in Q3FY25 terms.
IndiGo share price performance
Shares of the low cost carrier are down 13% since the beginning of the year and about 22% in the last six months. In the last 1 month, IndiGo shares are down 10%.
At about 11:50 am, shares of the company were trading at Rs 4,425, lower by 2% from the last close.
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