IndiGo’s Profit Soars 37% in Q1

Beats Street es­ti­mates by post­ing high­est quar­terly profit in In­dian avi­a­tion

The Economic Times - - Companies: Pursuit Of Profit - Anirban.Chowdhury @times­group.com

Mumbai: IndiGo would re­place the in­dus­try’s tra­di­tional sale-and-lease­back model for air­craft fi­nanc­ing with out­right pur­chases for some of its fu­ture fleet additions, un­der­scor­ing the fo­cus on cut­ting to­tal own­er­ships ex­penses by the low-cost air­line that Mon­day posted the big­gest-ever quar­terly profit in In­dian avi­a­tion.

The adop­tion of the new busi­ness model, ac­cord­ing to se­nior ex­ec­u­tives, would help IndiGo lower over­all costs of fleet own­er­ship. ET had re­ported six days ago an im­mi­nent change in global ac­count­ing stan­dards will, among other things, im­pact its air­craft lease rental strat­egy the most, and said the new norms may prompt car­ri­ers to mak­ing out­right pur­chases.

Chief fi­nan­cial of­fi­cer Ro­hit Philip said the air­line will shift to a model of out­right pur­chase of planes. Air­craft kept in the fleet for long are bet­ter owned than leased as di­rect own­er­ship leads to op­ti­mi­sa­tion of costs, Philip said.

Sep­a­rately, IndiGo on Mon­day an­nounced a net profit of .₹ 812 crore for the April-June quar­ter, up 37% from .₹ 592 crore a year ear­lier, aided by lower fi­nance costs and in­creased yields. Syd­ney-based con­sul­tant CAPA Cen­tre for Avi­a­tion called it the high­est quar­terly profit by any air­line in In­dia and said the re­ported profit beat its es­ti­mates of .₹ 700 crore. Sales in the June quar­ter soared 25% to .₹ 5,956 crore. The air­line's yields in­creased 2.2%. In a con­fer­ence call with an­a­lysts, chief fi­nan­cial of­fi­cer Ro­hit Philip said IndiGo’s yields in the April-June quar­ter last year were hit as it didn't go for ag­gres­sive price cuts.

IndiGo's rev­enue per avail­able seat kilo­me­tre in­creased by 5.5%. The air­line’s cost per avail­able seat kilo­me­tre in­creased by 1.3% but the costs ex­clud­ing fuel de­creased 2.5%, pri­mar­ily due to a 34% fall in fi­nance costs.

IndiGo has been ex­pand­ing its ca­pac­ity at a 25% an­nual rate and will grow at 20% by 2020.

An­a­lysts have at­trib­uted ro­bust earn­ings and cash-flow to smartly crafted air­craft or­ders and sale and lease­back deals.

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