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IndiGo flight schedule continues to be hampered, stock down 2%

IndiGo has cancelled over 40 flights today as well following Directorate General of Civil Aviation directive to ground its 9 aircraft that have Pratt & Whitney (P&W) engines.

In a press release yesterday, IndiGo stated that DGCA had directed the company to ground nine A320neo aircraft, leading to cancellation of flights. The company has said that since they have multiple flights to the same destination, it has tried to accommodate passengers on those flights or allowed the passengers to cancel the booking and get a refund without any cancellation charges.

Earlier in February 2018, Indigo grounded 3 of its A320neo aircraft over technical issues. While IndiGo’s revenues are expected to be marginally impacted, these incidents will halt its capacity addition since new deliveries of aircraft have been put on hold by aircraft manufacturer- Airbus. Indigo has a fleet of 153 aircraft, the largest in India and an outstanding order book to purchase 400 new aircraft by 2025. The company, however, plans to induct around 40 planes in the next one year, including leasing around 25 A320neo and delivery of 15 new ATRs.

Interglobe Aviation Ltd is currently trading at Rs1,273.70, down by Rs28.9 or 2.22% from its previous closing of Rs1,302.60 on the BSE.
The scrip opened at Rs1,290 and has touched a high and low of Rs1,290 and Rs1,270.45 respectively. So far 4,61,089(NSE+BSE) shares were traded on the counter. The current market cap of the company is Rs50,060.62cr.

In the long term, we expect Indigo to benefit from India’s strong growth potential in aviation market. Indigo is transforming strategically, in order to gain market share through (1) shifting from pure sale and leaseback models to buying aircraft, (2) targeting shorter term leases, while the Neo engine issues are resolved, and (3) increasing focus on regional routes (inducting ATRs vs. single aircraft type). The profitability is expected to rise on improving yields and fleet modernization