An overall fuel price increase of 11.6%, declining yields and an adverse forex impacted the earnings of low-cost carrier Indigo with its net profit declining by 73% during the January-March quarter at Rs 117.7 crore. Total income during the period increased 17.8% to Rs 6,056 crore compared to the same period last year. The company’s Ebitda was down 21.9% at Rs 1,132 crore while Ebitda margin stood at 19.5% compared to 29.9% in the same quarter last year.
But despite the bad performance during the quarter, the airline said that it will continue to grow capacity by 25% in FY19 on both domestic and international routes as it will increase some flights on the existing domestic network and on short haul international routes and add new destinations or sectors – Dhaka, Allahabad, Kolhapur, Zorhat and has already opened sales for its new flights to Trichi.
Rahul Bhatia, InterGlobe co-founder and director, said that the airline is not looking at the business on a quarter on quarter basis. Where IndiGo is concerned we are going long term and not going to shrink the capacity deployed based on quarter on quarter. We have the lowest cost structure in the industry and have taken a great punt on India and will continue to build our franchise.
The airline that recently had a change of leadership as its president and whole time director Aditya Ghosh quit last week, on a call with investors and analysts said that it continues to build its top leadership with an addition of three new team leaders Raj Raghavan, senior V-P, HR; Michael Swiatek, chief planning officer; and William Boutler, chief strategy officer, joining the airline.
The airline management said that there has been a yield decline of 5.6% across its network and that it is primarily driven by the industry selling below cost and due to competitive pressures the airline has to fall in line.
“The 0-15 day window is the most impacted,” said Ankur Goel, Head, Treasury and Investor Relations. He added that due to IndiGo’s low cost structure the airline will be able to withstand the pricing volatility that is there in the market currently and is likely to remain this way for some time though there are indications that yields have firmed up over the last week. “But it is difficult to say that the trend will continue,” he added.
The airline said there was no decline in bookings due to the P&W A320Neos engine trouble and the regulator grounding 14 of this aircraft type and that it will continue to add more aircraft and going forward the Neos will be majority of the fleet of IndiGo and that all the aircraft that are flying are new engine aircraft.
Talking about the fleet expansion plan for the airline going forward Wolfgang Prock- Schauer, IndiGo’s chief operating officer, said that with a forecast of 25% capacity expansion from May onwards till the end of year the airline will have significant deliveries and will also add the A321LRs that it will use for its long haul international operations which will give it more seats per mile and also with more Neos joining the fleet there will be fuel efficiency of about 15% that the Neos will bring along. “that is how we are hedging our fuel costs,” he said.
The airline management said that it is evaluating adding more Airbus aircraft to the fleet. It is long expected that IndiGo will be placing orders for wide-body Airbus A330 or A350 type as it prepares to launch its long haul international operations but the company did not elaborate the specific aircraft type. But going forward IndiGo said it plans on reducing its aircraft related debt and is focussed on buying aircraft witth free cash that the company has.
The airline also said that that as the Neos were grounded it had bridge leased aircraft on short term leases.
By Manisha Singhal