IndiGo Q2 FY27 Earnings Call: Fuel Surge Drives Rs. 19 Billion Loss, Guides Over 25% RASK Growth

Interglobe Aviation Ltd held its Q2 FY27 earnings call on October 29, 2026. Here's a quick read of what management said — performance, strategy, and the outlook ahead.

Fuel-Driven Loss in a Seasonally Soft Quarter

• Revenue of Rs.243 billion (+24% YoY) — Q2 FY 2026-2027 income driven by yield growth of over 34% and PRASK up 31%, exceeding the >25% PRASK guidance for the quarter; load factors fell 2 pp.
• Net loss of Rs.19 billion — vs a Rs.26 billion loss in Q2 FY 2025-2026; ex-MTM/hedging, the net loss was ~Rs.7 billion vs ~Rs.1 billion net profit a year ago. Management noted the PRASK beat did not fully offset abnormally elevated costs.
• EBITDA of Rs.25 billion (~11% margin) — vs Rs.11 billion (6% margin) in Q2 FY 2025-2026; on a like-for-like ex-MTM/hedging basis, EBITDA margin declined 5 pp, largely on fuel and cost escalations.
• Fuel cost rose 69% YoY — benchmark Singapore jet fuel index was 60% higher vs Q2 FY 2025-2026, compounded by rupee depreciation.
• CASK ex-fuel, ex-forex, ex-MTM at INR 3.45 (~15% higher YoY) — driven by 9% rupee depreciation over the 12 months through Q2 FY 2026-2027, fixed-cost under-absorption from capacity rationalization, and annual contractual escalations.
• Cargo revenue grew 37% YoY — ancillary revenues being strengthened via broader customer choices, easier digital access to add-ons, and pricing.
• Free cash of ~Rs.399 billion — total cash Rs.527 billion (incl. restricted cash of Rs.128 billion) at end-Q2 FY 2026-2027; management said this positions the company to navigate near-term volatility.

Jet-Crude Divergence Keeps the Cost Deck Elevated

• Crude is not the relevant driver — CEO Willie Walsh said jet fuel and crude prices have diverged due to widening crack spreads (observed as of Q2 FY 2026-2027); management is focused on the jet fuel price, with lower crude a positive only indirectly via disposable income.
• Crack spreads significantly elevated — historically a little over 20% vs a probable FY 2026-2027 average of around 60-65%, partly due to refining capacity disruption; management expects cracks to remain somewhat elevated going forward but not at FY 2026-2027's high levels.
• Q2 fuel cost declined QoQ despite rising jet fuel prices — CFO Kiran attributed this primarily to a government-imposed cap on domestic fuel prices (set at 25% over March prices, effective through June 8th of Q1 FY 2026-2027) and government VAT reductions.
• Non-fuel CASK inflation guided for FY 2026-2027 — CFO Kiran guided to early double digit or late single digit, a combination of very sharp INR depreciation this year and regular inflation running in early single digits; from FY 2027-2028 onwards, structural non-fuel CASK inflation is indicated in the mid-single digit range backing out FX.
• No fuel price forecast offered — Walsh declined to forecast prices for the coming months or FY 2027-2028, noting the industry historically adapts to fuel price changes given fuel's weight in the cost base.
• Fare pass-through expected — management asserted there is no way to avoid fare increases when fuel prices rise significantly, and expects a similar response across the industry since every airline pays the same fuel price.

Disciplined Deployment, Wide-Body Exit, A350 Ahead

• Capacity rationalization in Q2 FY 2026-2027 — pricing actions and disciplined deployment, together with a 5% reduction in industry seats, supported stronger revenue performance; domestic ASKs were broadly flat and international ASKs down ~2.9% in Q2 FY 2026-2027.
• Wide-body damp lease operations conclude effective 1 November (FY 2026-2027) — CFO Kiran expects removal to be accretive to spreads (RASK minus CASK), though management declined to quantify; learnings are expected to support the A350 introduction in 2028.
• Norse wet lease terminated with no long-term impact — Walsh said the A321XLR will be used to maintain the Amsterdam slot; no slot loss at London Heathrow or elsewhere was flagged.
• Fleet of 442 aircraft at end-Q2 FY 2026-2027 — inducted 22 aircraft from the original order book (all via the GIFT City entity); redelivered 10 aircraft plus 2 damp-lease aircraft. Fleet orders are not under review despite some Airbus delivery delays.
• Dar es Salaam announced as newest international destination — daily direct services from Mumbai beginning November (FY 2026-2027), expanding presence in Africa.
• Navi Mumbai airport "strategically critical" — Walsh said charges there are slightly higher but the shift is viewed as an investment in long-term growth, enabling Mumbai Airport to redevelop Terminal 1.
• No major domestic restructuring needed — IndiGo will remain agile, adjusting capacity up and down where demand shifts; Q2 FY 2026-2027 measures had a positive financial impact and the approach continues through Q3 and Q4 FY 2026-2027.

Yield-Load Factor Trade-off Under Scrutiny

• Load factor down ~220 bps while yield rose ~34% in Q2 FY 2026-2027 — a similar Q1 FY 2026-2027 pattern (load factor down 130 bps amid a sharp yield jump); analysts asked whether ATF-driven repricing is dampening demand. Walsh said revenue — the combination of yield and load factor — is the critical metric, evaluated across every part of the network.
• Premium contribution to Q2 FY 2026-2027 yield increase "wasn't meaningful" — Walsh framed the premium project's contribution as going forward, supported by a recently launched "Stretch" advertising campaign; early performance of stretch products described as "excellent".
• Ancillary revenue per passenger rose from ~Rs.525 to ~Rs.590 during Q2 FY 2026-2027 — management sees further scope, constrained by government restrictions in India on what must be offered as part of the base fare versus Europe.
• Ryanair context cited by Walsh — Ryanair's ancillary revenues per passenger are roughly 5-6x IndiGo's level, attributed largely to fare-inclusion requirements in India compared to Europe.
• Consistent domestic performance — Q2 FY 2026-2027 pricing/utilization was "pretty consistent" across the network and across the three investor-day sub-segments (metro-to-metro, metro-to-non-metro, non-metro-to-non-metro); no segment-level quantification provided.
• Other expenses decline was an accounting reclassification — CFO Kiran attributed the sequential decline to a grouping/classification adjustment of about Rs.178 crore, which squares up on a full 1H FY 2026-2027 basis, partially offset by higher airport handling costs from increased international departures.

Early Days on Loyalty; Long-Haul Off the Low-Cost Base

• Loyalty membership approaching 20 million as of Q2 FY 2026-2027 — IndiGo Blue Chip completed 2 years in October 2026 with more than 30 partners; Walsh said it is "very early days" and declined to quantify revenue contribution from blue-chip members, cautioning that early figures may not reflect long-term value.
• Loyalty can be a "very significant contributor" to revenue — Walsh, drawing on his prior IAG/Avios experience, said active members generate revenue at multiples of casual engaged customers; the opportunity is converting the 20 million base into active members; more detailed disclosures to come as the program matures.
• Long-haul built off the low-cost base — Walsh said IndiGo will not compromise its short-haul model and will remain "absolutely laser focused" on the short-haul, low-cost operation, expanding long-haul off that low base using XLRs and A350s.
• India long-haul opportunity "very significant" — Walsh cited 78 million international passengers in India versus 79 million at Heathrow — one European airport handling more international passengers than the entire country.
• Government fare intervention — no impact seen yet — on news that the government is planning levers to prevent sharp fare surges, Walsh said IndiGo does not see an impact at this stage on peak-season pricing or overall free-market pricing.
• Price stabilization fund — conditional participation — Walsh said IndiGo would "clearly look" to participate if it makes sense, but will not do anything that artificially impacts the right decisions given high fuel prices; he credited the government for looking at an innovative way to moderate the fuel price increase, with the fund's terms being the important issue.

Near-Term Challenging; Long-Term Targets Reaffirmed

• Q3 FY 2026-2027 guidance — capacity expected to grow early single digits YoY (reflecting damp-lease conclusion, the geopolitical environment, and disciplined deployment); RASK expected to grow >25% YoY based on October trends; ASP growth of 3% guided, weighted more toward international operations; load factors guided flat YoY on current position and forward bookings.
• FY 2026-2027 guidance — full-year capacity growth in early single digits; CASK ex-fuel, ex-forex MTM expected to increase in the high single digits to early double digits range, largely reflecting rupee depreciation plus usual escalations.
• Ex-fuel ex-forex growth guidance maintained despite H1 running at ~13% — CFO Kiran kept FY 2026-2027 at "late single digit, early double digit"; a full-year midpoint of ~10% implies ~7-8% YoY growth in H2 FY 2026-2027, with the Norse wide-body exit contributing to the H2 assumption.
• FY 2027-2028 ASK growth guidance of mid-teens maintained — Walsh said it is not being changed but will be kept under review; management is looking at deliveries of more than one per week, flagging possible short-term delays to some aircraft given OEM issues.
• FY30 ASKM target reaffirmed — Walsh said he is "happy to stick to" the long-term guidance of 300 billion ASKM by FY30, citing a strong foundation and a well-positioned fleet pipeline. Analyst Jinesh Joshi (PL Capital) estimated FY 2026-2027 ASKM may end at ~178-180 billion, implying a required CAGR of ~18-19% to reach 300 billion by FY30, questioning growth levers given domestic market share has "peaked out" and international expansion is slowing.
• Demand resilience not yet declared — Walsh said it is too early to call demand stabilization on the basis of one quarter (Q2 FY 2026-2027, traditionally soft), but demand has held up well and he is encouraged by trends going into Q3 FY 2026-2027; near-term outlook described as challenging.
• Airport-ownership risk flagged — on the possibility of airports being allowed to own airlines in India, Walsh flagged a clear conflict of interest with slot distribution and expects regulators to look very closely at it; he described the industry as brutally competitive, noting efficient airlines run by experienced people are not making money.