Low-cost carrier Indigo has managed to increase its market share to 38% from 35% in the three months to March. However, yields have fallen by 9.5% to Rs 3.64 per available seat kilometre due to lower ticket prices and resulted in an increase of just 7% in revenues.
The Gurgaon-based company’s net profits were flat at Rs 579.31 crore thanks to higher aircraft rentals, which increased by almost 28% y-o-y to Rs 699 crore. The average fare during the quarter also decreased by 15.2% y-o-y to Rs 3,958 while the passenger load factor was 85%.
Post the results announcement the Indigo stock lost lost 4.5% on Monday. However, they bounced back on Tuesday, gaining 2.94% to close at Rs 1,053.85 on BSE.
Aditya Ghosh, President, Indigo airlines told sector analysts on a conference call that engines of some of the A320 Neo aircraft delivered by Airbus have been facing a cooling issue.
Analysts say the relative lack of competition has helped Indigo in the past. “We believe the largest risk facing IndiGo is the timing of aircraft deliveries in and out of market cycles. Thus far, relative mismanagement by the competition has led to easy market share gains and well-timed capacity additions,” Citi Group wrote in a research note.
“In the fourth quarter of the previous year Indigo gained because SpiceJet was in trouble. This year a resurgent SpiceJet has provided competition,” said an analyst who did not want to be named.
According to aviation experts, Indigo took some A320 aircraft on short term leases which attract high interests cost. Also the fleet size of the airline during the last financial year increased to 107 from 94 aircraft, which drove up rentals. Although the number of passengers carried increased by 22% y-o-y during the quarter passenger revenues increased by only 5% y-o-y while the same from ancillary or cargo increased by 17.6% during the quarter.
Indigo expanded its network by introducing flights to Tier 1 and Tier 2 cities in Q4FY16 and the carrier will take some time to increase the passenger load factor on these routes.
The carrier inducted 21 A320 Neo aircraft in the current fiscal, which can help increase the market share.
The A320 neo aircraft is 15% more fuel efficient, say experts, which will help the airline financially should crude oil prices increase.
The company has also paid a dividend of R43 per share in FY 16 which translates into 93% payout. This is one of the highest dividends paid by any of the low cost carriers in the world.