India's aviation industry has witnessed significant expansion, emerging as the world's third-largest aviation market by 2025. After a severe…

India's aviation industry has witnessed significant expansion, emerging as the world's third-largest aviation market by 2025. After a severe downturn in FY 2020-21 due to the pandemic, the sector rebounded strongly by FY 2024-25, supported by affordable fares, a rising middle class and improved connectivity across metros as well as tier-2 and tier-3 cities. Airlines are expanding fleets, airports are scaling up infrastructure and passenger demand both domestic and international continues to grow. In FY 2024-25, total passenger traffic reached 220 million, surpassing pre-COVID levels by 25%. Despite this recovery, several airlines ceased operations between 2021 and 2024 due to financial stress caused by high aviation turbine fuel prices, depreciation of the Indian rupee against the US dollar, supply chain disruptions and intense competition. Industry profitability remained under pressure, with many carriers experiencing an average profit decline of around 14%. Amid these challenges, Avigo Airlines (Avigo), a business unit of Avigo Global Limited headquartered in New Delhi, stood out as one of the few consistently profitable carriers. The airline reported a net profit of 6,780 crore in FY2024-25, compared to 7,250 crore in FY2023-24. Although profits declined due to higher fuel costs, foreign exchange losses, increased airport charges and rising non-fuel operating expenses, the drop was considerably lower than the industry average. Avigo maintains a dominant 60% domestic market share. The Board of Directors of Avigo Global Limited comprises 12 members and is led by its Chairman, Mr. Karanveer, along with the Managing Director, Mr. Anirudh. The Board includes five Independent Directors and five Non-Independent Directors (including one woman director) and is recognized for its strong corporate governance practices. Founded in 2010 as a low-cost carrier, Avigo steadily expanded from serving a limited number of Indian cities to operating approximately 1,900 daily flights across 125 domestic and international destinations. Its fleet primarily consists of Airbus A320 family aircraft, enabling operational efficiency and cost optimization. Avigo's ultra-low-cost carrier model is built on aggressive cost control, high aircraft utilization, a point-to-point route network and lean staffing structures. Historically achieving on-time performance above 75-85%, the airline has strengthened its reputation for reliability and efficiency. Strategic initiatives such as sale-and-leaseback arrangements, operating a single aircraft type, maintaining a single-class configuration on domestic routes and securing manufacturer-backed maintenance agreements have further enhanced cost efficiency and productivity. While Avigo initially operated an all-economy configuration to minimize overhead and interior costs, it later introduced a dual-class setup on international routes to remain competitive. Avigo operates on a no-frills model while maintaining a strong focus on punctuality, safety, cleanliness, seamless transfers and efficient baggage handling. Consistent branding such as logos on headrest covers and in-flight magazines further strengthens Avigo's recognition and presence in the market. Avigo has successfully increased its revenue per available seat kilometer and consolidated its leadership position in India's rapidly growing aviation sector. In the financial year 2025-26, Avigo reported a net profit of 1,575 crore in Q1 and 862 crore in Q2. The sharp decrease in the second quarter was driven by the depreciation of Indian currency and the revaluation of dollar-denominated lease obligations. The operational crisis in Avigo erupted in November 2025 and escalated rapidly over the subsequent 20 days marking one of the most catastrophic days in Indian aviation history. During this disruption period, total 5,000 flights of Avigo Airlines were cancelled over a period of 20 days with peak daily cancellation of 700 flights, more than 6,00,000 passengers affected and on time performance decreased to 20%. The primary catalyst emerged from revised Flight Duty Time Limitations (FDTL) framework, introduced by DGCA in January 2024 to align with international standards. Key changes included mandatory weekly rest increased from 30 to 48 consecutive hours, stricter limits on night flying and maximum daily duty hours reduced to prevent fatigue accumulation. These modifications effectively reduced available pilot flying hours by 25%, necessitating proportional staff increase that Avigo failed to implement. Passengers faced unprecedented disruptions, including airport waits exceeding 12 hours with little support. International travellers were stranded due to single-entry visa issues, unclaimed baggage piled up at major airports and alternative carriers tripled fares on key routes, further worsening the crisis. The crisis costs company 600 crore due to compensation paid to passengers, fines imposed by the Government in meeting deadlines. Company reported 60% decline in the December Quarter net profit at 345 crore. The primary causes of Avigo's operational failure stemmed from an over extended lean operating model that lacked adequate structural support. Key issues included ineffective workforce planning, out dated or insufficient rostering technology and cost-cutting culture that prioritized aggressive optimization over investment in infrastructure and operational resilience. Early warning signals from FDTL concerns were reportedly overlooked, compounding crew availability challenges. Additionally, the airline's dominant market position may have fostered complacency, further delaying critical investments in systems, staffing depth and contingency planning. The Board established a Crisis Management Group (CMG), chaired by Karanveer Singh and supported by three Independent Directors, to oversee the November 2025 operational breakdown caused by crew shortages, software issues and network planning challenges. The CMG met daily to restore operational integrity. Avigo implemented immediate stabilisation measures and long-term reforms, including a temporary 7% flight reduction, improved crew rostering and coordination with the aviation regulator for flexible duty rules. To rebuild passenger confidence, the airline offered refunds and compensation and launched a recruitment drive to hire over 750 pilots and other administrative staff, to prevent future staff shortages. During a Board Meeting held on 15th December 2025, the Board members reviewed the root causes of recent operational crisis in detail and discussed appropriate measures to prevent its recurrence. It was unanimously decided to commit 3% of annual revenue to IT infrastructure modernisation and to implement AI driven predictive rostering and disruptive management systems to strengthen operational reliance. Mr. Neeraj, an Independent Director holding a Master's degree in Business Administration from the Indian Institute of Management, Pune, recommended adopting the McKinsey 7S Model to ensure that the planned initiatives are implemented effectively and sustained over the long term. In view of the increased responsibilities of the directors compared to the previous year, the Board of Directors have decided, by way of altering the Articles of Association through a special resolution, to revise the sitting fees for Board meetings from 50,000 per meeting to 60,000 per meeting for all directors other than independent directors and women director and to 75,000 per meeting for all independent directors and women director. In March 2026, anticipating a decline in market interest rates, the Chief Financial Officer (CFO) is considering the call of 500 crore of 10-year bonds with a face value of 1,000 each, issued five years ago with a callable feature at a coupon rate of 13%. The bonds were issued at a premium of 50 per bond, generating total proceeds of 525 crore and incurred an initial flotation cost of 1.20 crore. They are currently callable at 1,100 per bond. To refinance the existing debt, the company plans to issue 500 crore of new 11%, 10 year bonds at par value (₹ 1,000 per bond), with an estimated floatation cost of 1.50 crore. The after-tax cost of debt is 8% and floatation cost is written off for tax purpose in five years. The CFO has instructed CA Ankit, Finance Manager, to assess the viability and financial implications of retiring the bonds by the end of March 2026. The company tax rate is 25%. Avigo Global Limited had entered into a lease arrangement on 1st April 2021 for office space measuring - 6,000 sq. ft. for a period of 10 years. As per the terms of the agreement, lease payments of 6,00,000 per annum were payable in advance at the beginning of each year. The agreement also provided an option to extend the lease for an additional period of 5 years at an annual rent of 8,00,000. It is the company's policy to depreciate RoU asset on straight line basis. However, the Company had not shown any intention to exercise the extension option at the time of lease agreement. The Company had incurred initial direct costs amounting to 3,00,000 in connection with the lease. The incremental borrowing rate at the commencement date, i.e., 1st April 2021 was 11% per annum. In March 2026, due to space constraints arising from the recruitment of additional staff in the next year, the Company decided to take on lease an additional 3,000 sq. ft. in the same building. It is decided to enter into a separate lease agreement for additional space for a period of 9 years and the additional space will be available for use from March 2027. The incremental borrowing rate as of 31st March 2026 is 12% per annum. The company also decided to exercise the extension option relating to the original 6,000 sq. ft. lease at the end of the year 2025-26. A team of four officers from Income-tax Department descended upon the company's Head Office at New Delhi on 15th February 2026 to conduct TDS survey under Income-tax Act, 1961. After completing the necessary formalities, they asked for the TDS returns filed during the financial year 2024-25 and three quarters of 2025-26. After perusing the company's accounts, bills and TDS returns, the team summarised following points in the matter of TDS deduction and incidental issues: (i) Company has made payment of lease rent of 24 crore to PQR Fleet Services IFSC Limited located in Gujarat International Finance Tec-City for lease of an aircraft which commenced in June 2025. Neither tax has been deducted on lease rent paid during the year nor these payments have been reported in TDS returns filed by the company. (ii) Company has paid landing and parking charges of 12 crore to Airport Authority of India and 8 crore to private airport operators. The company has deducted tax @ 2% instead of 10% as the payments are in the nature of rent paid for use of space. (iii) Company has taken an engine on lease in financial year 2025-26 under an arrangement with a foreign company, a tax resident of Germany. Company deducted tax at source @ 10% on lease rental paid as per the provisions contained under DTAA between India and Germany. Chief Accountant informed that foreign company has no permanent establishment in India. However, revenue officers contended that in the absence of furnishing of PAN, TDS is to be deducted at a higher rate of 20% as per the relevant provisions of Income-tax Act, 1961. (iv) The Company allowed exemptions and deductions to its employees during financial year 2024-25 relevant to Assessment Year 2025-26 on account of House Rent Allowance (HRA), Leave Travel Concession (LTC) and deductions under Chapter VI-A of the Income-tax Act, 1961. In cases, where the monthly rent exceeded - 10,000, the Company accepted cash rent receipts containing only the address of the property as supporting evidence. Further, exemption in respect of Leave Travel Concession was allowed on self-declaration submitted by employees who had exercised the option to opt out of the new tax regime under Section 115BAC. During verification conducted in financial year 2025-26, it was observed that in 10 cases the rent receipts furnished by employees were not found to be genuine. It was further noticed that in 20 cases, employees ultimately filed their returns of income under the new tax regime and discharged the tax liability accordingly at the time of filing their returns. Before leaving, the income-tax officer issued show cause notice in respect of above issues. In the financial year 2025-26, Avigo enhanced the passenger experience by offering complimentary high-speed WiFi for economy class travellers and meals on board, with the value of these meals included in the fare. The company partnered with Royal Caterers Pvt. Ltd., an outdoor catering service, to provide these meals. In February 2026, Avigo collected a total of 2,000 crore (excluding GST) from both domestic and international flights. Of this, 1,600 crore was generated from economy class passengers, which includes 60 crore as Passenger Service Fee (PSF) and 50 crore as User Development Fee (UDF). Additionally, 400 crore was collected from business class passengers, which includes 12 crore as PSF and 8 crore as UDF. Royal Caterers Pvt. Ltd. submitted a tax invoice for 5.90 crore (including IGST 18%). Total ITC available in GSTR 2B for the month of February 2026 is 26.50 crore. The applicable GST rates are 5% on economy class fares, 18% on business class fares and 18% on PSF and UDF payable by airline operator.