IndiGo Q4 Net Flat as Sales Fail to Soar

FLIGHT PATH Op­er­at­ing costs and weak rev­enue growth off­set fuel cost ben­e­fits

The Economic Times - - Companies: Pursuit Of Profit - Our Bureau

FUEL COST VS Mum­bai: IndiGo's fourth quar­ter net profit re­mained flat on year hurt by weak rev­enue growth and in­crease in costs such as lease rentals for planes and en­gines and salaries, which off­set ben­e­fits ac­cru­ing from lower fuel ex­penses. For the full fi­nan­cial year FY16 its net profit rose 52.6% to .₹ 1,989.7 crore.

The coun­try’s big­gest air­line by mar­ket share posted a net profit of .₹ 579.3 crore for the Jan­uary­March quar­ter, com­pared to .₹ 577.3 crore a year ear­lier. Rev­enue grew 6.8% to .₹ 4,060.6 crore from .₹ 3,800.9 crore in the cor­re­spond­ing pe­riod last year. Its op­er­at­ing profit for the quar­ter fell 12% to .₹ 680.8 crore.

The air­line had on Fe­bru­ary 29 es­ti­mated a rev­enue growth of 6% to 8% and that its net profit would be im­pacted due to ex­change rate move­ments.

The air­line an­nounced a fi­nal div­i­dend of .₹ 15 per share for the quar­ter ended March 31.

Fuel cost for the quar­ter re­duced 15% to .₹ 1,023.6 crore, but non­fuel costs rose 29% to .₹ 2,413.1 crore. Av­er­age fare for the quar­ter fell 15% on year to .₹ 3,958 and rev­enue per avail­able seat kilo­me­tre fell by 10% in­di­cat­ing the pres­sure on yields as the air­line in­creases its ca­pac­ity. For fis­cal year 2017, IndiGo’s avail­able seat kilo­me­tre will in­crease by 34% as new air­craft join its fleet.

IndiGo’s fi­nance chief Pankaj Madan said the in­crease in non-fu- el costs was on ac­count of fac­tors such as ru­pee de­pre­ci­a­tion and ex­cess of staff in com­par­i­son to ca­pac­ity. IndiGo faced close to a three­month de­lay in get­ting the first of its Air­bus A320 Neo planes. It has or­dered a to­tal of 430 planes.

Ghosh said the ad­di­tional staff ex­penses will get de­frayed once more planes start com­ing in. It has got four of them. The lat­est one joined its fleet in the af­ter­noon.

Ghosh also said af­ter the first150 planes join IndiGo’s fleet, it will re­view its choice of the en­gine maker. US’ Pratt & Whit­ney cur­rently sup­plies the en­gines to most Neos glob­ally in­clud­ing those op­er­ated by IndiGo. The de­lay in de­liv­er­ies have been due to tech­ni­cal gl­itches with the Pratt & Whit­ney en­gines, pri­mary among them be­ing the gap taken be­tween the cool­ing time when the en­gines stops and the restart.

Ghosh said the tech­ni­cal dis­patch re­li­a­bil­ity—a mea­sure for how tech­ni­cal gl­itches af­fect a plane’s op­er­a­tions — is 99.02% on the Neo com­pared to a more ef­fi­cient 99.94% on its older planes.

Ghosh said the air­line will “closely look at” how air­lines that have taken Neo en­gines man­u­fac­tured by CFM In­ter­na­tional fare in terms of air­craft per­for­mance. CFM is a joint ven­ture be­tween GE Avi­a­tion, a divi­sion of Gen­eral Elec­tric of the United States and Snecma, a divi­sion of Safran of France.

Last month Al Baker, the chief of Qatar Air­ways, also a cus­tomer for the Neos said the air­line is will­ing to switch en­gine mak­ers.

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