Disruptions at IndiGo are "credit negative", says Moody's; downgrades score for human capital

New Delhi [India], December 8 (ANI): The disruptions at InterGlobe Aviation Limited (IndiGo) are "credit negative", said global credit rating agency, Moody's, adding that the airlines 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 the Directorate General of Civil Aviation (DGCA).
"We have downgraded IndiGo's issuer category score for human capital to 4 from 3, reflecting the adverse impact of slower hiring on the airline's operations. Although IndiGo does not have employee unions, its pilots, through broader pilot associations in India, possess significant collective bargaining power," it said.
"Although the fundamentals of IndiGo's Baa3 rating remain intact, including its dominant market share, low penetration rates for air travel in India, strong macro growth fundamentals and IndiGo's long-term leverage sustainable below 3.5x," it added.
The airline's profitability will be negatively impacted in the current fiscal year ending 31 March 2026, it highlighted.
Notably, on December 6, DCGA has issued show cause notices to IndiGo's Chief Executive Officer, Pieter Elbers, and its Chief Operating Officer, Isidro Porqueras.
This could ultimately affect continuity of senior leadership at IndiGo, the rating agency said.
The airline's operations, which provide cost efficiencies in stable times, did not show resilience needed for change in regulations, leading to cancellation of around 1,600 flights on December 5.
IndiGo's ontime performance dropped to 68% in November from 84% in October, with over 1,200 cancellations in November.
However, the airlines on Monday claimed to have optimized its operations.
"Today (December 8), we are all set to operate over 1,800 flights, connecting all stations that we operate to. We have optimized our operations and managed to reduce the number of cancellations which are being notified to customers in advance, and our on-time performance (OTP) has also improved to 91% across the network."
"Over 1800 flights operated which is up from ~1,650 yesterday, and 90% on-time performance (OTP) across the entire network has been registered, up from ~75% yesterday," the statement read. (ANI)