IndiGo crisis: DGCA receives airline's response, says it will take appropriate action; shares tumble 15% in 5 sessions

DGCA said it would take enforcement action.

DGCA stands for the Directorate General of Civil Aviation (DGCA).

Last seen, the stock was trading in the green at ₹4,948, up 0.50% on the NSE.

It also said that the airline is "profusely apologetic" and deeply regrets the inconvenience and hardship caused to customers following flight cancellations.

DGCA said it was in the process of examining the response, and enforcement action, as deemed appropriate, will be taken in due course.

The regulator had on Saturday issued show-cause notices to IndiGo CEO Pieter Elbers and Accountable Manager Isidro Porqueras, seeking explanations within 24 hours regarding the massive flight disruptions.

This was later extended to Monday, 6 pm, after the airline sought more time from the regulator.

"IndiGo submitted replies signed by both the Chief Executive Officer and Chief Operating Officer on December 8 at 1801 hours," the DGCA said in a statement.

IndiGo, in its response, said the disruption resulted from a combination of factors, including minor technical glitches, schedule changes linked to the start of the winter season, adverse weather conditions and increased congestion in the aviation system, as well as the implementation of and operation under the updated crew rostering rules (Flight Duty Time Limitation Phase II)—which coincided in lesser or greater measure, as per the statement.

The airline, in its response, stated that "it is realistically not possible to pinpoint the exact cause(s) at this time due to the complexity and vast scale of operations".

It also noted that the DGCA's manual allows a fifteen-day response time for show-cause notices, suggesting more time is needed to conduct a comprehensive 'Root Cause Analysis' (RCA).

Govt to curtail IndiGo's winter flight schedule

Civil Aviation Minister K. Ram Mohan Naidu on Monday said the government will curtail IndiGo's winter flight schedule and allocate them to other operators following the airline's recent large-scale operational disruptions.

"We will curtail IndiGo's routes. They are currently operating 2,200 flights. We will definitely curtail them," Naidu told the Doordarshan news channel.

The minister also said that refunds worth ₹745 crore have been given for 7,30,655 cancelled PNRs from December 1 to 8 (as of 5 pm).

Besides this, he said that 6,000 of the 9,000 passenger bags have already been delivered, and the remaining ones are scheduled to be delivered by either tonight or Tuesday morning.

IndiGo flight cancellations: Moody's credit negative

The widespread disruptions in IndiGo flights, resulting from the airline's failure to plan for aviation regulations communicated to the industry more than a year in advance, could result in financial damage from loss of revenue as well as potential penalties for cancellations, Moody's Ratings said on Monday.

In a note, Moody's said the disruptions are "credit negative" for the airline. "Despite a temporary reprieve, failure to effectively plan for new aviation regulations is credit negative."

The disruptions, which coincided with peak winter schedules, resulted in over 1,600 flight cancellations on December 5, after similar operational issues in November left more than 1,200 flights grounded. Flight cancellations started on December 2, and the airline is yet to restore normalcy. More than 500 flights were cancelled on Monday.

"The disruptions are credit negative because IndiGo could face significant financial damage from loss of revenue because of flight cancellations, refunds and other compensation to affected customers, along with potential penalties imposed by DGCA," Moody's said.

Moody's cited the airline's "significant lapses in planning, oversight and resource management" as the primary cause, noting that the regulations had been communicated to the industry more than a year in advance.

IndiGo share price trend

Data show that the airline’s stock has crashed 15.33% over the past five sessions (from the December 2 to December 8 closing level). On Monday, shares tumbled 8.62% to settle at ₹4,907.50 apiece on the NSE.