The big takeaway from IndiGo’s Q2 results: India’s biggest airline is preparing for a rainy day

India’s largest carrier IndiGo announced its Q2-FY26 and First Half FY20 results on Tuesday. ₹2,582.1 crore in the second quarter of FY26 due to the impact of massive currency depreciation. The airline recorded a surplus ₹103.9 crore before the impact of foreign exchange, the depreciation of the rupee is hurting the airline, which now has significant dollar-denominated bills.

When the pandemic hit the world, there were only a handful of airlines with the financial strength and will to weather the hurricane that hit them. On the other side of the pandemic, such airlines have become even stronger and mightier, which has helped with the situation the post-pandemic world is in, namely the scarcity of almost everything in aviation. IndiGo was one of them, where domestic competition weakened and regional heavyweights such as AirAsia and Lion Air were unable to cope with the epidemic. IndiGo now aims to have 30% to 40% of its fleet off operating lease by 2030. This is also the period when the airline aims to have its fleet number around 600 aircraft, as previously announced.

Operational leasing involves airlines entering into a lease with the lessor for a fixed period of use and operating the aircraft for that period of use before redelivering the aircraft under the conditions specified in the contract. Lessors then market the aircraft to other carriers. Traditionally, IndiGo had a six-year lease cycle, which helped the airline return planes to lessors before expensive D-Checks matured. But things have changed since then for both aviation OEMs and IndiGo. A finance lease is a long-term lease that transfers most of the risks and rewards of ownership to the lessee and treats it like a financed purchase; An operating lease is a shorter-term lease in which the lessor retains ownership and risk. Key differences include a financial lease’s long-term commitment and the option to eventually transfer ownership, versus an operating lease’s flexibility of short-term use without transfer of ownership. In simple terms, operating lease is more like a lease while finance lease is owning the asset once its EMIs are completed. IndiGo is also focusing on owning assets, which it started before the pandemic but paused during the pandemic due to relatively weak financials and uncertainty.

Aviation is a cyclical business, and sharp focus is what separates major airlines from those barely surviving. IndiGo currently has 14 aircraft, of which 62 are on financial lease and 333 are on operating lease. Just a year ago, at the end of the September quarter 2025, these figures were 3 owned, 37 leased and 345 operating leases.

Are you preparing for the next rainy day?

IndiGo is using its existing cash position and environment to shore up its balance sheet as it prepares to launch A350s. Apart from being cyclical, aviation is also affected by sudden geopolitical events that can make or break airlines. Having assets on the balance sheet can be a savior because these assets can be used to execute Sale and Leaseback agreements that help generate cash in times of need. IndiGo experienced this firsthand while conducting Sale and Leaseback for ATRs during the pandemic. These planes were leased until then.

IndiGo may have tried this on a very small scale and at a time when its balance sheet didn’t really need it, but Jet Airways continued its operations as long as it had aircraft on lease and engaged in periodic Sale and Leaseback transactions. With the sale of its land in the Bandra Kurla Complex and the valuation of the Frequent Flyer Programme, the airline managed to continue its operation, but when all avenues were exhausted, there were no more tranches of funds from the frequent flyer programme, and almost all narrow-body aircraft with remaining life were already being traded for Sale and Leaseback to raise cash.

Grounding continues

IndiGo continues to ground more than 40 aircraft, all powered by Pratt & Whitney. The problem started in mid-2023 and has dogged operators around the world ever since. The airline currently doesn’t have a view on when this will end, but the percentage of Pratt & Whitney-powered aircraft in IndiGo’s fleet is decreasing by the day as all its new inductions are powered by rival CFM. Both the airline and the OEM have remained silent on the compensation issue, although IndiGo had reported in the past that it had indeed received some compensation, which was recognized as revenue from operations. It remains unclear how much revenue comes from operations and how much from compensation.

The airline will get a big boost when it gets rid of 26 A320ceos, which consume more fuel than the A320neos, and Pratt & Whitney-powered planes are removed from IndiGo’s fleet.

Author Ameya Joshi is an aviation analyst.