Indigo’s first quarter profit nosedives 97%
MUMBAI : Interglobe Aviation Ltd, the operator of Indigo airline, posted its biggest-ever drop in quarterly profit as rising jet fuel prices and a foreign exchange loss outweighed higher passenger traffic at India’s largest domestic carrier by marketshare.
Profit in the three months through June fell 97% to ₹27.79 crore, from ₹811.14 crore a year earlier. It was the sharpest drop in profit since the carrier listed on the local stock exchanges in November 2015.
Revenue rose 14.5% to ₹6,818.34 crore from a year earlier, as Indigo flew more passengers, although at the expense of yields as intense competition restricted its ability to raise fares enough to sufficiently cover the increased costs.
Indigo, one of the biggest customers globally for Airbus, would have plunged into a loss fiscal first quarter had it not been for finance income, income from sale and leaseback of aircraft, compensation for engine snags that lead to grounding of Airbus A320neo jetliners powered by Pratt & Whitney engines.
Profit in the June quarter was lower due to a foreign exchange loss, higher fuel prices, competitive domestic fare environment leading to lower yields and rise in aircraft maintenance cost, Indigo’s chief financial officer Rohit Philip said in a conference call with analysts on Monday.
Indigo’s fuel expenses surged 54% in the June quarter to ₹2,715.6 crore. It incurred a foreign exchange loss of ₹250 crore during the quarter.
The airline carried a total of 14.1 million domestic passengers in the June quarter, up from 11.8 million a year earlier, according to government data.
“The current level of yields is not sustainable in long term, especially the yields received from the (ticket bookings) during the 0-15 day window,” Greg Taylor, the company’s senior adviser said during the call.
Airlines in India earn more money from tickets booked up to 15 days before the date of journey as they normally cost more than those booked months in advance.
“But, Indigo is in better position to sustain and do well in the long term,” Taylor said.
Indigo had 169 aircraft as of end-june and a total cash balance of ₹13,205.60 crore. It ended the quarter with a net debt of ₹2,521.9 crore.
Looking ahead, Indigo plans to launch more flights to international destinations in the coming quarters to tap this lucrative market and offset pricing pressure in its home market of India.
“While we remain focused on building our domestic networks, we will also connect additional Indian cities with (existing) international destinations as well as new international destinations,” co-founder Rahul Bhatia said during the call.
“With our existing fleet and new A321neos, which we will take delivery by end of the year, Indigo will have capacity to reach cities in China, Middleeast (Asia) and South-east Asia,” Bhatia said.
He said the airline has secured traffic rights to Abu Dhabi, Kaula Lumpur, Kuwait, Male, Jeddah and Hong Kong among others.
Indigo currently deploys 15% of its fleet capacity on international routes. The airline flies to eight overseas destinations such as Dubai, Doha, Dhaka, Colombo, Bangkok and Singapore.
However, the airline is not happy with the intermittent grounding of its A320neo fleet due to technical snags or unavailability of spare parts for its Pratt & Whitney engines.
“We remain cautiously optimistic about the situation and hope that the situation with the spare parts (of A320neos) improves in the current quarter,” Bhatia said.