InterGlobe Aviation revenue beats estimates as ATF costs compress margins

Investment View and Recommendation

In its July 25, 2026 result update, Anand Rathi Research maintained its BUY rating on InterGlobe Aviation (IndiGo) and retained its target price of Rs5,550. The broker views the sharp increase in aviation turbine fuel (ATF) costs following the West Asia conflict as a near-term headwind, but remains positive on IndiGo’s long-term compounding potential.

The positive view is supported by IndiGo’s leading domestic market position, strong balance sheet, low competitive intensity and large aircraft order book.

Q1 FY27 Financial and Operating Performance

InterGlobe Aviation reported Q1 FY27 revenue of Rs24,580 crore, an increase of about 20 per cent year on year. Revenue was about 2.8 per cent above Anand Rathi’s estimate and 1.9 per cent ahead of Street expectations.

The revenue outperformance was driven by available seat kilometre (ASK) growth of about 2.9 per cent to 43.5 billion and a 21.3 per cent improvement in yield to approximately Rs6.04. Load factor declined by about 130 basis points year on year to 83.3 per cent, while revenue per available seat kilometre (RASK) increased about 16.3 per cent to Rs5.65.

ATF Cost Pressure and Management Response

Despite the revenue beat, Q1 FY27 EBITDA declined about 37.7 per cent year on year to Rs3,350 crore, while the EBITDA margin contracted by about 1,259 basis points to 13.6 per cent. The principal cause was higher fuel expense following the West Asia conflict. Fuel cost per available seat kilometre rose to about Rs2.5 from Rs1.38 in Q1 FY26.

EBITDAR fell about 33.7 per cent to Rs3,890 crore, and the EBITDAR margin declined about 1,280 basis points to 15.8 per cent.

Pre-war ATF prices of about US$85 to US$90 increased approximately 120 per cent after the conflict. International fuel prices reached about US$180 during the quarter, while domestic price increases were capped at about 25 per cent until June 8, 2026. The blended ATF rate was about US$140 to US$150.

Management redirected some capacity towards domestic demand as West Asia-related disruption affected deployment. Middle East capacity utilisation recovered to about 95 per cent, equivalent to roughly 160 flights. IndiGo inducted about 13 aircraft and returned about nine aircraft from its original order book.

• Prioritised fuel-efficient aircraft.
• Reduced discretionary spending.
• Deferred senior-level increments.
• Returned damp-leased and older-technology CEO aircraft.

Operating Outlook and Estimates

For Q2 FY27E, Anand Rathi expects ASK to remain sequentially flat because the quarter is seasonally weak and India–West Asia travel faces operational uncertainty. A low base and fare increases, with yields trending upwards, are expected to drive about 25 per cent year-on-year PRASK growth, while load factor is expected to decline marginally.

For FY27E, the broker forecasts high single-digit to early double-digit growth in CASK excluding fuel and foreign exchange, resulting in an EBITDA margin of 11.7 per cent.

Market Position, Balance Sheet and Fleet Expansion

The broker highlights IndiGo’s approximately 66.3 per cent market share in June 2026 and about Rs39,000 crore of free cash at the end of Q1 FY27. IndiGo’s order book exceeds 900 aircraft, significantly higher than the approximately 513 aircraft for Air India, 196 for Akasa and 120 for SpiceJet.

Estimate Revisions and Valuation

Anand Rathi cut its FY27E revenue estimate by 9.8 per cent and reduced its EBITDA estimate by 31.7 per cent. The broker now expects a net loss of Rs1,653 crore, compared with its earlier profit forecast.

The FY28E EBITDA estimate was raised 7.9 per cent to Rs27,450 crore, while the net profit estimate was increased 34.1 per cent to Rs10,790 crore.

At the CMP of Rs4,975, the stock traded at about 18.6 times FY27E EBITDA and 8 times FY28E EBITDA. The target price of Rs5,550 is based on 9.5 times FY28E EBITDA and implies 11.5 per cent upside.

Key Risks

• Further increases in ATF prices.
• Rupee depreciation.
• Delayed aircraft deliveries.
• External disruptions such as a pandemic or war.