IndiGo to take de­liv­ery of 24 Air­bus A320­neo air­craft by March 2017

The Pak Banker - - COMPANIES/BOSS -

IndiGo, In­dia's largest air­line by mar­ket share, on Mon­day said air­craft man­u­fac­turer Air­bus SAS has con­firmed that be­gin­ning March, it will de­liver 24 fuel ef­fi­cient A320­neo air­craft by March 2017, as com­pared to the orig­i­nal plan to de­liver 26 A320­neos.

In De­cem­ber, In­terGlobe Avi­a­tion Ltd that runs IndiGo had said that the de­liv­ery of the first fuel-ef­fi­cient Air­bus A320­neo has been de­layed and there could be ad­di­tional de­lays, cit­ing "in­dus­trial rea­sons" at Euro­pean plane maker Air­bus SAS.

In­duc­tion of A320­neos is crit­i­cal for IndiGo, which has been con­sis­tently prof­itable since 2009, a feat un­ri­valled by any other do­mes­tic air­line, to reach the next level of revo­lu­tion­ary growth.

"The new A320­neo pow­ered by Pratt and Whit­ney's fuel-ef­fi­cient geared turbo fan en­gines will en­able us to struc­turally re­duce our costs as fuel con­tin­ues to be the sin­gle largest el­e­ment of our cost struc­ture. This also marks the be­gin­ning of the next phase of our growth and will en­able us to make air trans­porta­tion far more ac­ces­si­ble for the peo­ple of In­dia," said Aditya Ghosh, pres­i­dent and whole-time di­rec­tor of IndiGo.

In re­sponse to nu­mer­ous ques­tions re­ceived by IndiGo over the last few months, the com­pany wants to take this op­por­tu­nity to pro­vide ad­di­tional in­for­ma­tion re­gard­ing its short and medium term op­er­a­tional out­look, IndiGo said in a state­ment on Mon­day.

The air travel mar­ket in In­dia has con­tin­ued to grow at one of the high­est rates in the world. Dur­ing the last 12 months ended 31 Jan­uary 2016, to­tal do­mes­tic pas­sen­gers in In­dia in­creased by 21% and, for the same pe­riod, to­tal pas­sen­gers served by IndiGo in­creased by 35.5%.

To ad­dress this strong de­mand, IndiGo has also en­tered into at­trac­tive leases for seven more used A320 air­craft which will be in­ducted be­tween March and Novem­ber of 2016. Over­all, on a year-on-year (y-o-y) ba­sis, IndiGo ex­pects to grow its fleet by 13 air­craft in the fourth quar­ter of fis­cal 2016, fol­lowed by y-o-y in­creases of 11 air­craft in the first quar­ter, 21 air­craft in the se­cond quar­ter, 27 air­craft in the third quar­ter and 24 air­craft in the fourth quar­ter of fis­cal year 2017.

"Also, in the fourth quar­ter of fis­cal year 2016, while year-over-year ca­pac­ity is ex­pected to grow by about 19%, EBITDAR (earn­ings be­fore in­ter­est, tax, de­pre­ci­a­tion, amor­ti­sa­tion and rental) mar­gins are ex­pected to be strong at around 35% to 37% and at last year's lev­els. How­ever, for the fourth quar­ter, year-over-year rev­enue is ex­pected to in­crease by 6% to 8% and net profit will also be im­pacted due to the ex­change rate move­ment in the In­dian ru­pee ver­sus the US dol­lar," IndiGo said.

For fis­cal 2017, to­tal fleet strength is ex­pected to in­crease by about 22.4% on a y-o-y ba­sis, al­low­ing IndiGo to ab­sorb ad­di­tional man­power in its op­er­a­tions that were hired in ex­pec­ta­tion of tak­ing de­liv- ery of nine A320­neo air­craft be­tween De­cem­ber 2015 and March 2016.

"With the res­o­lu­tion of the de­liv­ery of A320­neos, IndiGo ex­pects to con­tinue with its strong op­er­at­ing per­for­mance, growth in prof­itabil­ity and healthy cash gen­er­a­tion. In­dia re­mains one of the most un­der pen­e­trated avi­a­tion mar­kets in the world. The com­bi­na­tion of our unique struc­tural cost ad­van­tages, su­perb prod­uct qual­ity and large fuel-ef­fi­cient air­craft or­ders would en­able us to de­liver su­pe­rior fi­nan­cial per­for­mance for a long pe­riod of time," Ghosh added.

Cur­rently, with its fleet of 102 new Air­bus A320 air­craft, the air­line of­fers over 700 peak daily flights con­nect­ing 35 do­mes­tic des­ti­na­tions and five in­ter­na­tional des­ti­na­tions, Bangkok, Dubai, Kath­mandu, Mus­cat and Sin­ga­pore. Air­bus had in­formed about po­ten­tial de­lays of A320­neo air­craft de­liv­ery on 17 De­cem­ber 2015.

Since 18 De­cem­ber to till date, shares of IndiGo fell 27.3%. On 10 Fe­bru­ary the stock went below its of­fer price of Rs.765 for the first time since list­ing.As the launch cus­tomer of the A320­neo, IndiGo was wait­ing ea­gerly to take de­liv­ery of the planes that will help it cut fuel costs by 1015%. IndiGo had or­dered 100 Air­bus A320 air­craft in June 2005, 180 A320­neo air­craft in June 2011 and 250 A320­neo air­craft in Au­gust 2015. Each of th­ese was the largest sin­gle air­craft or­der by num­ber from Air­bus at the time the or­der was placed, ac­cord­ing to the plane maker.

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