India’s largest airline by market share, IndiGo, on Wednesday said it expected its quarterly earnings to be “materially impacted” because of the outbreak of the novel coronavirus (COVID-19). The airline said that it has seen a 15-20% week-on-week decline in its daily bookings over the past few days as a result of the outbreak. “Please note that the numbers could change from here based on how the situation evolves,” IndiGo said. Additionally, the depreciating rupee will also have an impact on its foreign exchange liabilities.
Over the past two months, IndiGo has cancelled flights to China and Hong Kong, and reduced frequency to certain destinations in Southeast Asia since the outbreak. However, that capacity was re-deployed in other markets earlier and did not materially impact their revenues, the company said. The low-cost carrier posted a 168% annual rise in net profit during the December quarter, driven by capacity and margin expansion in its international markets.
The sharp depreciation in the rupee since the outbreak of COVID-19 will have an adverse impact on the airline’s dollar-denominated liabilities, mainly on account of operating leases. During the recent rout, rupee fell to as low as Rs 74.185 against the US dollar during intra-day trading last week. In the December quarter, when the rupee level was at Rs 71.20 per US dollar, IndiGo posted mark-to-market losses worth Rs 130 crore on capital operating leases.
The COVID-19 outbreak has resulted in massive scaling down of operations for airlines across the globe. Airlines are seeing significant cancellations and airfares have reduced by around 30-35%. Companies have slashed schedules and some even asked staff to take leave to mitigate the impact of the massive disruptions. Many countries have issued travel advisories against the most affected geographies including China, Italy, Iran and South Korea. According to the World Health Organisation’s latest update, there are over 1.13 lakh confirmed cases and over 4,000 deaths. India, so far, has around 60 confirmed positive cases. Airlines in India have also asked the government for financial support to tide over the outbreak’s impact.
