IndiGo cancellations add to demand drag as airfares slide to four-year low

According to analysts at Elara Capital, airfares slipped about 1% in the October-December period from ₹5,485 last year to ₹5,436 in 2025, even as domestic air travel growth slowed sharply to 3% growth in Q3FY26 compared to the same period in FY25, from 9% in Q3FY25 compared to Q3FY24.

According to Gagan Dixit, aviation, chemicals, oil & gas analyst at Elara Capital, this happened because 300 routes (of 400), which carry about a fifth of India's air traffic, saw a 6% decline in fares in the quarter.

“This hints at demand-side concerns in the current high airfare environment," Dixit wrote in a report dated 8 January. “The decline in airfare prices has been seen in non-metro cities more, while prices remained largely flat in the metro cities."

Alongside, data from the aviation regulator—Directorate General of Civil Aviation—showed domestic air traffic declining across successive quarters in 2025, from 43.2 million in January-March, to 42 million in April-June and 38.2 million in the July-September period. Data for October-December is yet to be released by DGCA.

The drop in fares came despite the four major airlines—IndiGo, Tata-backed Air India group, Akasa Air and SpiceJet—operating a combined 550 aircraft during the quarter, 6% higher than the 518 aircraft operated a year ago. Dixit noted that the industry’s passenger load factor (PLF) of 87% remained flat year-on-year, indicating slower demand growth.

Analysts attribute the sharper decline in non-metro airfares to passenger cancellations triggered by IndiGo’s operational disruption in December.

According to Shobit Singhal, associate director at Anand Rathi Institutional Equities, the decline in non-metro fares may be linked to passengers shifting to alternative modes of transport amid uncertainty caused by flight disruptions.

Jinesh Joshi, aviation analyst at PL Capital, a Mumbai-based financial services group, said the flight cancellations by IndiGo—which controls around 60-65% of the domestic market—created a supply crunch, which would typically have pushed fares higher, but “this impact was felt mainly on metro and busy routes where travel is often unavoidable due to corporate or other essential reasons".

“On non-metro routes, which are largely driven by leisure travel, passengers tend to cancel or postpone trips more easily during disruptions, leading to weaker demand and softer fares," he said.

Joshi added that IndiGo had revised its Q3 passenger revenue per available seat km (PRASK) guidance to a mid-single-digit percentage decline, indicating fare softness on select routes. PRASK measures how much money an airline earns for every seat flown per km, regardless of whether it is sold.

E-mails sent to IndiGo, Air India, SpiceJet and Akasa remained unanswered till press time.

IndiGo’s flight cancellations

In early December, a combination of pilot shortages and planning gaps in implementing the second and final phase of flight duty time limitations (FDTL) norms led to more than 4,500 flight cancellations by IndiGo—its worst operational stretch since listing in 2015.

The FDTL norms are aimed at reducing pilot fatigue and enhancing safety, and came into effect on 1 November. The new norms forced airlines to rework duty rosters, night-landing schedules and weekly rest plans.

IndiGo has since outlined plans to add 158 pilots by 10 February, who will operate under the new FDTL norms, and a further 742 pilots by December next year, according to a document reviewed by Mint.

InterGlobe Aviation Ltd, which operates IndiGo, and SpiceJet are India’s two listed airlines. Tata Group-backed Air India and Akasa Air are privately held. Together, IndiGo and Air India command over 90% of the domestic market. Akasa and SpiceJet have market shares of 4.7% and 3.7%, respectively.

Slowing passenger growth

“We expect domestic demand to grow by a mere 3% YoY in Q3FY26E versus a 2% decline in Q2FY26 and 9% YoY growth in Q4FY25, due to declining fleet size of non-IndiGo carriers and pilot shortages dragging the Winter 2025 schedule," Dixit wrote.

According to Icra’s December report, traffic growth during the first eight months of FY26 slowed to 2.2% year-on-year, impacted by cross-border escalations, an aircraft accident in June 2025 that dampened travel sentiment, and weaker business travel amid uncertainty over tariff imposition by US President Donald Trump.

Icra has revised its outlook for domestic passenger traffic growth to 0–3% for the current fiscal year, from an earlier forecast of 4–6%. The revision factors in the June crash, cross-border disruptions, and IndiGo’s cancellations between 3 and 8 December, which accounted for around 0.4% of total annual industry departures. Despite the limited numerical impact, Icra expects travel sentiment to soften in the aftermath.

“There will be some increase in fares on metro routes in December led by IndiGo’s cancellations. But these should stabilize in January," said Mark D. Martin, founder of Martin Consulting.

While Indian airlines have collectively ordered more than 1,000 aircraft for delivery by 2032, analysts caution that a single-quarter fare decline does not signal a structural demand slowdown.

PL Capital’s Joshi remains cautiously optimistic. “We saw domestic passenger traffic grow in October and November after declining in the previous quarter, with November recording a record 15 million passengers. As festive travel was concentrated in October, November saw a strong return of business travel, lifting overall volumes," he said.