From operating over 2,200 flights a day in December 2024 to cancelling nearly 1,600 flights between December 1 and 15, 2025, and nearly 4,500 flights over the month, a lot changed for InterGlobe Aviation in a short span of time.The stock began 2025 on a strong note, rallying 48% in the first 11 months as IndiGo delivered consistently high on-time performance. But December proved turbulent. As thousands of passengers were stranded due to mass cancellations, the airline’s share price lost altitude, falling as much as 18% in just 15 days.IndiGo’s Flight Cancellations in December 2025 Source: Nuvama Brokerage Report dated December 11, 2025IndiGo blamed the new Flight Duty Time Limit (FDTL) norms. The government termed it an operational failure. But were the cancellations really caused by the new rules? Is the market overreacting to operational risk? And will the need for additional pilots materially impact IndiGo’s profitability in the short to medium term?Let’s find out.Four elements drive IndiGo’s share price and value — network expansion, fleet strategy, operational excellence, and customer engagement. The recent chaos affected the operational excellence of a company that works on wafer-thin margins.Is complying with FDTL an operational risk for IndiGo?The revised FDTL norms — raising weekly pilot rest hours from 36 to 48 and reducing weekly night landings from six to two — were not introduced overnight. They had been under discussion for over two years and came into effect on November 1, 2025. IndiGo’s large-scale cancellations occurred between December 1 and 15 and were resolved only after the government granted a temporary exemption from the new rules until February 10, 2026.One explanation lies in IndiGo’s operating model. The airline maximises aircraft utilisation with minimal ground time. Its turnaround time from disembarking to boarding passengers takes on average 20 -25 minutes, as against the industry average of 45 minutes. When an airline that spends most of its time in the air suddenly loses 12 hours of pilot flying time per week, the operational impact is bigger.Another reason is fleet standardisation to mostly A320 aircraft, which brings cost efficiencies in pilot and crew training, maintenance, and repairs. However, a software update across the A320 fleet coincided with the implementation of FDTL norms and the holiday-season travel rush. This came at a time when IndiGo had increased its winter schedule by nearly 10% and was expanding its network, leaving little operational flexibility.Indian Airlines’ Winter Schedule 2025 and 2024Story continues below this ad Source: Ministry of Civil AviationOther carriers, particularly Air India, had reduced its winter schedule due to the Vistara merger and heightened safety checks following the June 2025 crash, insulating it from the immediate impact of the new norms.Are employee costs and pilot shortages the real concern?HSBC estimates that compliance with the new guidelines would require IndiGo to hire more pilots, increasing staff costs by Rs 45-90 crore annually. This would raise cost per available seat kilometre (ASK) by only 1%. In India, salaries account for just 5.4% of an airline’s total costs (DGCA data), compared with 28% globally (IATA data).Indian Aviation Industry’s Cost Structure Source: DCGA FY 2024-25 HandbookIt is not the direct cost of salaries, but the opportunity cost of a slowdown in network expansion and reduced fleet capacity utilisation that makes investors and analysts apprehensive. A pilot roster issue has not changed the structural benefit of IndiGo, nor has it affected its secular growth. It has slowed the aggressive growth plans. The same is visible from IndiGo’s Q3 FY26 revised guidance:● DCGA has cut IndiGo’s winter flights by 10%, because of which the airline has reduced average seat kilometre growth to high single to early double-digit from the earlier high teens.Story continues below this ad● Passenger revenue ASK (PRASK) growth reduced to mid-single digit decline from the earlier estimate of flat to slight growth.The real reason behind the December stock correctionThe four pillars of IndiGo’s business model are interconnected. The airline buys aircraft in bulk at a discounted price, sells them at a higher price, and leases them back for use. Because of this fleet strategy, IndiGo always has sufficient cash reserves to handle various macro and operational disruptions and avoid a cash crunch.IndiGo’s Cash and Debt Position Source: InterGlobe Aviation’s Q2 FY26 Earnings PresentationHowever, the fleet strategy will only work when capacity utilisation is at peak, meaning the flight earns enough to pay for its lease and operating expenses. For that, the planes had to be in the air and not on the ground most of the time, which led to network expansion and customer experience.This brings us to the important financial measure of cost. This cost is broken down to per seat and kilometre, where fuel is the highest cost. However, 2025 saw other costs also rise because of external factors:Story continues below this adDepreciating rupee: IndiGo sends 90-95% of its fleet abroad for Maintenance, Repair, and Overhaul (MRO). With the rupee depreciating and fleet size rising, every Rs 1 depreciation led to Rs 900 crore foreign exchange loss in Q2 FY26.Aircraft on ground (AOG): The Pratt & Whitney engine issue also increased AOG, and the burden to earn the lease of these idle aircraft fell upon those in the air.Damp lease: A disruption in operations because of idle aircraft and growing demand for international travel encouraged IndiGo to take aircraft on damp lease, wherein the lessor provides aircraft, pilot, and crew. Damp lease hurts the margin but retains customers.IndiGo’s passenger revenue grew only 2.3% while its cost increased 10% year-over-year (YoY) in Q2 FY26 as forex losses ballooned 1,102% YoY to Rs 2,892 crore. For one seat, IndiGo paid Rs 5.16 per kilometre, of which Rs 0.7 was only forex loss compared to just Rs 0.06 in the same quarter last year.Story continues below this adWhile IndiGo’s sale and lease back model continues to grow average seat kilometre at 9% YoY, FDTL norms will moderate the passenger revenue growth to 5%, according to Nuvama estimate. Factor in penalties on Rs 8,300 crore in refunds and Rs 1,500 crore in forex loss, and the brokerage expects a 40% dip in IndiGo’s Q3 EBITDAR.EBITDAR is the most important measure for an airline as it represents the earnings before finance income and cost, tax, depreciation, amortisation, and aircraft rental. It tells whether the airline is making money from its daily operations. Since IndiGo faced operational disruption in Q3, its EBITDAR will likely take a hit.IndiGo’s Financial Performance Q2 FY26 Source: InterGlobe Aviation’s Q2 FY26 Earnings PresentationIndiGo’s Q2 EBITDAR fell 54% YoY, and it reported a net loss of Rs 2,582 crore. Still, its share price remained unaffected. It is because Q2 is a seasonally weak quarter. The airline has reported losses in three of the previous four second quarters.However, Q3 and Q4 are seasonally strong, and drive profits. If its seasonal profit takes a hit, the share price could react. The FDTL norms have hit IndiGo where it hurts the most – seasonal profits.Story continues below this adThen why did IndiGo’s share price decline stop at 18%? The stock is trading at a price-to-earnings (P/E) ratio of 37.5x, well above its 10-year median of 23.6x. It is because the pilot shortage has slowed the network expansion, but it can still operate flights, and its structural strength and secular long-term growth remain intact.Long-term growth prospects remain intactIndiGo is currently absorbing the costs of damp leases, forex volatility, and high ATF taxes to build cost-efficient domestic and international operations.The airline has ordered 30 A350 wide-body aircraft to expand its international presence. Until their delivery, it will bear the damp lease cost to build a market share. The dollar and pound revenue from international flights will act as a natural hedge against forex losses. Moreover, refuelling from international destinations will reduce the ATF cost.Another long-term opportunity is IndiGo’s Rs 1,000 crore MRO facility in Bengaluru. With a fleet of almost 900 aircraft by 2032, the in-house MRO facility will help IndiGo reduce costs significantly and give it an operational edge over international airlines, which are facing a shortage of skilled people.Story continues below this adOther than international skies and MRO, the secular growth for air travel remains intact. India is still largely underserved, with its largest population that has not yet travelled in a plane and the largest diaspora in the world. The growing number of airports will increase regional connectivity and help airlines reach underserved markets. It is for this secular growth that IndiGo and Air India have ordered 500+ planes.Is IndiGo’s market share at risk?The December disruptions have made regulators wary of the duopoly in the airline industry, raising concerns that further market share gain would be difficult for IndiGo. The government even gave a green signal to three new airlines – Al Hind Air, Fly Express, and Shankh Air – to boost competition, but high taxes, rising fuel costs, and regulatory changes pose an entry barrier.Additionally, proposals around free cancellations within 48 hours and flexible name changes are under discussion. While still preliminary, such policies could materially affect a capital-intensive industry where profitability is calculated seat by seat and kilometre by kilometre.How should investors view the stock?The FDTL norms, forex losses, and a moderation in passenger revenue will affect IndiGo’s earnings in the short term. However, the airline’s a crisis management expects perations to stabilise by February 10, 2026.Story continues below this adMargin pressure represents turbulence, but not structural damage. The receipt of A321 XLR shows that the airline is on track to achieve its long-term growth. Most analysts have cut their price target to reflect the impact of the December setback, but see an upside in the long term.Brokerage Price Target for IndiGoAnalystRevised Price Target (Rs)Earlier Price Target (Rs)Deviation from the Current Market Price of Rs 4905Analyst RatingPrabhudas Lilladher5,2366,3327%HoldJefferies6,0357,02523%BuyUBS6,35029%BuyHSBC5,9776,92022%BuyMorgan Stanley6,54033%OverweightCiti6,50033%BuyInvestec4,050-17%SellSource: Brokerage ReportsFor investors bullish on IndiGo’s long-term growth, this correction is increasingly being viewed as a buy-on-dips opportunity.Note: We have relied on data from http://www.Screener.in throughout this article. Only in cases where the data was not available have we used an alternate, but widely used and accepted source of information.Puja Tayal is a financial writer with over 17 years of experience in the field of fundamental research.Disclosure: The writer and his dependents do not hold the stocks discussed in this article.The website managers, its employee(s), and contributors/writers/authors of articles have or may have an outstanding buy or sell position or holding in the securities, options on securities or other related investments of issuers and/or companies discussed therein. The content of the articles and the interpretation of data are solely the personal views of the contributors/ writers/authors. Investors must make their own investment decisions based on their specific objectives, resources and only after consulting such independent advisors as may be necessary.