IndiGo's December flight chaos could cost it more than ₹2,000cr
What's the story
India's largest airline, IndiGo, is likely to suffer a financial blow of over ₹2,000 crore due to the massive operational disruption in early December. The incident had thrown India's passenger flight network into disarray. The estimated loss includes major costs such as ticket refunds and regulatory-mandated passenger compensation. It also covers goodwill gestures announced by the airline and other expenses like bank guarantees, and hotel accommodation for stranded passengers among others.
Quarterly reflection
Financial impact to be reflected in quarterly results
The financial impact of the disruption will be partly reflected in the December quarter results of InterGlobe Aviation, IndiGo's parent company. These results will be announced on January 22. However, a significant portion of the impact is likely to spill over into the March quarter. One of the biggest cost components is a goodwill initiative called 'Gesture of Care.'
Cost breakdown
'Gesture of Care' initiative and passenger compensation
Under the 'Gesture of Care' program, passengers whose flights were canceled or delayed by over three hours between December 3 and December 5 will get vouchers worth ₹10,000 each. The total cost of this gesture alone is estimated to be between ₹500-1,000 crore. Further, over 300,000 stranded passengers were compensated up to ₹10,000 under Civil Aviation Requirements (CAR) norms.
Recovery efforts
IndiGo's response to the disruption
In the first week of the disruption, which started around December 2-3 and saw over 2,500 flights canceled, IndiGo refunded ₹827 crore to customers. The airline also arranged over 9,500 hotel rooms and deployed nearly 10,000 cabs and buses for affected passengers during this period. "The company is still calculating the total impact of the disruption," an industry source said to Moneycontrol.
Regulatory response
Regulatory action and penalties imposed on IndiGo
On January 17, the Directorate General of Civil Aviation (DGCA) fined IndiGo ₹22.2 crore and asked it to furnish a bank guarantee of ₹50 crore. The aviation regulator also cautioned the airline's CEO for inadequate oversight of flight operations. Warnings were issued to other senior executives for lapses in operational supervision and roster management amid this disruption.