IndiGo profit drops 7.3%
Lower fares, higher non-fuel costs hit margins
InterGlobe Aviation, which runs the country’s largest airline, IndiGo, on Monday reported a 7.3 per cent decline in net profit on account of higher nonfuel expenses, pressure on yields and a dip in passenger load factor.
Net profit for the first quarter (Q1) of the financial year 2016-17 (FY 17) was ~591.78 crore as against ~638.90 crore in same period last year (2015-16).
In its result, the airline also said it is looking to slow down induction of A320neo planes to allow engine manufacturer Pratt & Whitney to complete the engine upgrade work.
But later, in a conference call with analysts, the airline management said it is yet to take a decision and hopes to receive additional 19 A320neo planes this year according to its original schedule.
IndiGo has 109 aircraft in its fleet and 430 A320neo on order.
Pratt & Whitney manufacture all engines for A320neo. This year, IndiGo is expected to induct 29 planes into its fleet.
The decline in profit has prompted industry consultancy CAPA to lower the airline’s profit estimate for FY17.
“The impact of lower yields is visible. We expect stronger impact in Q2, as yields for all airlines have dropped significantly in the last four weeks. We see IndiGo’s FY17 profit lower than FY16 and see resumption of a very strong capacity growth cycle, possibly from Q3, further hurting
The net profit fell compared to ~638.9 cr in the year-ago period
yields and industry financials,” said Kapil Kaul, the South Asia chief executive officer of CAPA.
Capacity growth is increase in the number of seats in an airline.
The total income from operations in Q1 FY17 increased by 8.5 per cent to ~4,545.19 crore as against ~4,188.88 crore in the same period the previous year, mainly on a 20.8 per cent increase in ancillary revenue to ~580.57 crore.
Passenger revenue for the quarter increased by 6.9 per cent to ~3,971.73 crore.
But, the revenue growth was slower than estimates because of lower fares and a decline in load factor.
IndiGo’s load factor for the quarter declined by 2.43 per cent to 83.6 per cent, from 86.03 per cent last year. The Compass: Pricing pressure, costs take wind out of IndiGo
591.8 CR