Interglobe Aviation shares surged as much as 5% on Monday, January 19, following a positive assessment from Jefferies regarding the recent regulatory developments surrounding IndiGo's December operational disruptions.

Jefferies Raises Price Target Despite Regulatory Action

Jefferies reiterated its 'Buy' rating and increased the price target to ₹6,140, representing approximately 30% upside from the previous closing level. The revised target sits just 1.3% below IndiGo's 52-week high of ₹6,225.05, achieved on August 18, 2025.

DGCA Penalty and Regulatory Response

The Directorate General of Civil Aviation imposed a ₹22.20 crore fine on IndiGo for disruptions in December 2025 and mandated a ₹50 crore bank guarantee. The regulator identified several operational deficiencies including over-optimisation, weak preparedness, software gaps, and management lapses.

Disciplinary actions included warnings to senior executives, including the CEO and COO, while the SVP of Operations Control Center was removed from accountable roles. DGCA has directed the airline to take further internal action against other personnel.

Operational Recovery and Market Outlook

DGCA acknowledged IndiGo's operational turnaround as "noticeably swift," with schedules stabilising quickly and voluntary care vouchers extended to passengers. All refunds for flights cancelled between December 3 and 5, 2025 have been processed and returned to the original payment methods.

Jefferies highlighted that the fines appear modest, likely due to regulatory caps, and noted that focus will shift to DGCA's guidance on normalising schedules once compliance milestones are met. The brokerage stated that attention now turns to whether DGCA will continue the 10% schedule cut through winter or permit operational normalisation.

Crisis Background and Financial Impact

The December operational crisis originated from the implementation of revised FDTL norms on November 1, 2025, which created pilot shortages and triggered over 3,500 cancellations in early December. DGCA implemented temporary measures including capped fares, enforced refunds, and increased compliance scrutiny, with effects extending into January alongside a parallel CCI probe.

Despite a 15% drop in market value during the crisis, major global brokerages including Goldman Sachs and BofA maintain 'Buy' ratings, citing IndiGo's dominant 60% market share and low-cost operating structure.

Upcoming Earnings and Market Position

The positive analyst commentary precedes IndiGo's December quarter earnings, scheduled for January 22. In Q2 FY26, the airline reported a consolidated net loss of ₹2,582.00 crore, more than 2.5 times higher than ₹986.70 crore in the previous year, as costs outpaced revenue growth. Revenue from operations rose 9.3% year-on-year to ₹18,555.30 crore for the July-September quarter, driven by higher passenger volumes and improved yields.

InterGlobe Aviation has acknowledged eight DGCA orders following an inquiry into operational disruptions that occurred between December 3-5, 2025, resulting in financial penalties totaling ₹22.20 crore. The airline's board has committed to comprehensive systemic reforms and improved internal procedures following the regulatory action disclosed under Regulation 30 of SEBI regulations on January 17, 2025.

DGCA Inquiry and Financial Penalties

The Directorate General of Civil Aviation conducted a detailed inquiry into the December 2025 operational disruptions, leading to multiple regulatory orders with significant financial implications.

The bank guarantee will be governed under the IndiGo Systemic Reform Assurance Scheme (ISRAS), with phased release linked to DGCA-verified implementation of systemic reform measures.

Executive Actions and Disciplinary Measures

The DGCA orders include disciplinary actions against key executives responsible for operational oversight during the disruption period.

Regulatory Violations and Compliance Issues

The DGCA orders stem from non-adherence to directions issued under Rule 133A of the Aircraft Rules, 1937. The inquiry committee specifically examined the airline's compliance with revised Flight Duty Time Limitations (FDTL) and other Civil Aviation Requirements during the three-day disruption period.

The continued non-compliance penalty of ₹20.40 crore covers a 68-day period from December 5, 2025, to February 10, 2026, indicating ongoing regulatory violations beyond the initial disruption period.

Board Commitment and Future Actions

Following the DGCA orders, InterGlobe Aviation's board has committed to addressing the identified operational issues through comprehensive systemic reforms. The company has promised to improve internal procedures to prevent similar disruptions in the future, demonstrating acknowledgment of the regulatory concerns raised by the aviation authority.

Despite the severity of the penalties, DGCA acknowledged that InterGlobe Aviation restored normal operations within a short period following the December 2025 disruptions. The company is currently reviewing the DGCA orders and will take necessary actions as required, with no additional material impact on other business activities communicated as part of the regulatory orders.