InterGlobe Aviation Ltd’s shares rose about 3% in early trading on Tuesday, after the company reported a 205% jump in pre-tax profit for the December quarter. InterGlobe runs IndiGo, India’s largest airline.

But the company’s shares have since given up most of those gains since, and were trading 1.8% lower at the time of writing.

That’s because the skies are looking a bit cloudy from a near-term perspective.

In a post earnings conference call, Ronojoy Dutta, chief executive officer, IndiGo, said, “As we move to the seasonally weak fourth quarter, we will find it difficult to produce year over year improvement in unit revenues because we will be comparing ourselves against a base period when Jet Airways capacity was beginning to decline."

Besides, the company is facing some headwinds with regards to employee and maintenance costs.

In any case, the huge jump in profits in Q3 came off an extremely low base, and growth in revenues was largely driven by an increase in capacity. It’s interesting to note that passenger yield rose just 1.2% on a year-on-year basis. Passenger yield is a measure of average fare paid per kilometer, per passenger.

Non-fuel costs rose 17%, although the drop in oil prices put a lid on overall costs. Revenue passenger kilometres rose over 22%, tracking the growth in capacity, and drove revenue and profit growth.

Note that on 4 December, the company had said in a presentation that its pre-tax profit for Q3FY20 would be similar to Q3FY19 levels of Rs182 crore. On Monday, when IndiGo announced its Q3FY20 results after market hours, its pre-tax profit came in at Rs557 crore, which was also far higher than analysts’ estimates.

IndiGo has maintained its capacity guidance given in December, with available seat kilometres (ASKs) expected to increase 23% in FY20.

While the increase in capacity is driving revenue growth, analysts are a tad disappointed with the trend in yields, especially given that one large competitor exited the market last year. “With low yielding capacity (LCC’s) largely taking over Jet Airways’ slots, there is an increase in competitive intensity especially on the metro to metro routes," Paarth Gala of Prabhudas Lilladher Pvt. Ltd wrote in a note to clients.

The rise non-fuel cost is a worry too. “We expect IndiGo’s Cask to remain under pressure in the near term due to increase in maintenance cost due to re-assessment of contracts, DGCA deadline to replace unmodified engines on all A320neos by 31st May 2020; and underutilized pilots/ aircrafts," added Gala.

To be sure, investors seem to be pricing these concerns already, going by the share price correction in recent months. The IndiGo stock has declined by over 20% from its 52-week high of ₹1899 seen on 30 September.