Hit by Covid, IndiGo decides to experiment with new revenue model

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Published: June 2, 2020 7:39 PM

InterGlobe Aviation, the parent firm of IndiGo, on Tuesday reported a net loss of Rs 871 crore in the March quarter and would not be doling out any dividend. 

Covid and subsequent lockdowns have significantly impacted the aviation industry, including airlines.

Faced with headwinds due to the coronavirus pandemic, the country’ largest carrier IndiGo will experiment with new network and revenue models as well as implement measures that will result in additional liquidity of up to Rs 4,000 crore. InterGlobe Aviation, the parent firm of IndiGo, on Tuesday reported a net loss of Rs 871 crore in the March quarter and would not be doling out any dividend. “We will be reducing our unit costs even further, making our fleet more efficient, ensuring our capacity is right sized to the market and experimenting with new network and revenue models,” IndiGo CEO Ronojoy Dutta said in an earnings call.

Amid the challenging environment, Dutta emphasised that in these times, the focus must shift from profitability and growth to managing cash and liquidity. “To preserve cash, we are not looking to pay any dividend this year. We will continue to take steps to shore up our liquidity… We are in the process of revising full year capacity guidance,” he said.

The coronavirus pandemic and subsequent lockdowns have significantly impacted the aviation industry, including airlines.  IndiGo CFO Aditya Pande said the company has taken various steps to reduce costs and improve liquidity.
There have been 5-25 per cent salary cut across the organisation, except for certain employees with lower pay grade and all merit-based salary increments have been deferred, among other measures, he added.

“We will be constantly reviewing the numbers and adjust them to revenue environment… We are looking at every element of cost and working with partners to work out better prices and terms… We have reached out to suppliers for favourable credit terms,” he said.

According to him, these measures would result in additional liquidity of Rs 3,000-4,000 crore over nine months.
“We are also looking to raise finance against unencumbered assets of IndiGo which could be additional source of liquidity,” he noted.

To a query on possible consolidation in the domestic airline industry, Dutta said IndiGo has no plans for buying or selling. “We don’t want to buy any airline or sell our airline to anyone. What happens around us. I don’t know, I don’t want to speculate on that at all. We are clearly on go alone strategy,” he said.

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