Target: ₹6,300
CMP: ₹834.20
The ongoing US–Israel conflict with Iran has rendered significant portions of the Middle East (ME) airspace inaccessible, leading to widespread flight cancellations and rerouting of services.
This, combined with the existing closure of Pakistan’s airspace, has disrupted Indigo’s international operations (about 30 per cent ASK share), with flights to or through the ME (about 45 per cent of its international ASK) now affected.
The company indicated that over 500 flights to the ME and select long-haul destinations (including Istanbul, Athens, Manchester, and Amsterdam) were cancelled between February 28 and March 3, due to airspace restrictions.
With the conflict persisting, cancellations have been extended through Mach 4-6, with around 130–140 flights cancelled daily. At the same time, concerns around crude supply disruption following the closure of the Strait of Hormuz have driven up crude prices to >$90/bbl.
Jet fuel cracks have more than doubled to $40–50/bbl, with some spot benchmarks showing up to USD80/bbl.
If current trends persist, ATF prices for Apr-26E may rise by over 40 per cent, although the extent of pass-through by OMCs remains uncertain. While near-term visibility on the conflict remains limited, the strategic importance of ME energy flows to global markets could accelerate a resolution, in our view.
We will revisit our estimates and TP as the fiscal comes to a close and on taking cues from next year’s guidance. We retain Buy, with Dec-27E TP of ₹6,300.