Indigo on Cloud 9 as Dec quarter profit soars 168%
NEW DELHI: Interglobe Aviation Ltd, which runs India’s largest airline by market share, has more than doubled its profit in the fiscal third quarter buoyed by higher revenue, lower expenses and higher yields.
The company also expects to adhere to the May-end deadline of the Directorate General of Civil Aviation (DGCA) to replace all faulty Pratt and Whitney engines (P&W) powering its Airbus SE A320neo family of planes with modified engines. Indigo will also shortly decide on the status of its operations to China following the deadly coronavirus outbreak that has killed 81 people there.
Consolidated net profit at Indigo, one of the biggest customers worldwide for Airbus, surged 168% to ₹495.97 crore in the three months to 31 December from ₹185.17 crore a year earlier. The figure widely surpassed the ₹267.7 crore consensus estimate of 14 analysts surveyed by Bloomberg.
The airline, which expanded its capacity 19% from a year earlier during the quarter, recorded a 25.53% increase in revenue to ₹10,330 crore in the December quarter. Revenue, however, lagged behind the ₹8,922.90 crore consensus estimate in the Bloomberg survey.
“We reported a profit before tax of ₹560 crore, with a profit before tax margin of 5.6% compared to 2.3% profit before tax margin for the same quarter last year,” Indigo chief executive Ronojoy Dutta said in a statement.
Dutta said the airline started flights to seven new international destinations and on 17 new domestic routes, operating a peak of 1,634 daily flights in the quarter.
Total costs during the quarter climbed 21.5% from a year earlier to ₹9,773.64 crore. Fuel costs, however, fell 2% to ₹3,341.94 crore.
The airline said it expects to grow capacity by 23% this fiscal as it continues to take delivery of four-five A320neo aircraft each month.
“We are held up due to engine changes and pilot training at the moment. But, after June, we will be able to go full throttle and ramp up our aircraft utilisation,” Dutta said in a conference call with analysts. “If Airbus gives us planes faster, we will take the planes.”
At the end of 31 December, Indigo had 257 aircraft in its fleet. This consisted of 96 Airbus A320neo planes, 126 A320ceo planes, 10 A321neo and 25 ATR planes.
“Indigo was able to report better yields during the third quarter. Though the fares haven’t changed much during the last 12 months, Indigo has been able to optimise its fares during the last two-three quarters,” a Mumbaibased analyst at a foreign brokerage said on condition of anonymity.
“The better results are due to the airline being able to get higher revenue (including compensation from Airbus and Pratt and Whitney) and higher yields during the December quarter, along with its ability to keep its costs under control. The falling of fuel price definitely helped the airline,” added the analyst.
Dutta confirmed that Indigo has received financial compensation from Airbus and P&W for the issues with the A320neo planes. He, however declined, to elaborate.
Indigo’s yields grew 1.2% to ₹3.88 per kilometre at the end of December. Passenger load factor rose to 87.6% from 85.3% a year ago.
Asked about plans to replace all faulty P&W engines on its A320neos with modified engines by DGCA’S deadline, Wolfgang Prock-schauer, president and chief operating officer at Indigo, said, “The problem and the fix has been identified.”
Dutta, meanwhile, declined to comment on the privatization of national carrier Air India Ltd, the expression of interest for which was released by the Union government on Monday.