IndiGo crisis: India plans action over flight cancellations

India will take strict action against IndiGo following at least 2,000 flight cancellations this month, the country’s civil aviation minister said on Monday, to “set an example” for airlines that violate regulations.

The cancellations by India’s biggest airline, due to crew shortages after it failed to plan in time for stricter rules on pilot rest, left tens of thousands of passengers stranded, upending vacation plans and weddings, and has sparked a growing passenger fury about lost luggage.

It has also raised concerns about the dominance of a single airline in a country of 1.4 billion people.
The crisis has sent IndiGo’s shares down nearly 17% over the past seven days, wiping $4.3 billion off its market value. That included an 8.3% drop in the share price on Monday.

“We are doing an inquiry and will take very, very strict action… we will set an example for all the other airlines,” Minister Ram Mohan Naidu told lawmakers. IndiGo did not immediately respond to a request for comment on Naidu’s remarks.

India’s aviation regulator has served notices to IndiGo CEO Pieter Elbers and COO Isidre Porqueras warning of regulatory action that could include penalties and officials being suspended, according to notices seen by Reuters on Saturday.

EARNINGS HIT EXPECTED

In the first indication of the number of passengers affected, the government said 586,705 tickets were cancelled between December 1 and 7, and refunds of 569.65 crore rupees ($63.22 million) were issued.

JM Financial estimated on Monday an earnings hit of 8-9% for the fiscal year ending next March, if the disruptions last for a total of about 15 days, excluding any penalty the government may impose over the disruptions. Moody’s

Ratings warned on Monday that IndiGo could face “significant financial damage.”
IndiGo, which controls about 65% of the Indian aviation market, has said it failed to plan adequately for a

November 1 deadline to implement stricter rules on night flying and weekly rest for pilots. Other Indian airlines have not had the same problems.

On Monday, IndiGo cancelled about 500 flights, according to the Indian government.

Meanwhile, investors are placing bets that other airlines will benefit from IndiGo’s woes. Shares of rival SpiceJet, one of the few listed major airlines in India, jumped 13.9% on Monday.