Interglobe Aviation, the owners of the country’s largest airline by marketshare, on Monday reported an impressive set of numbers ahead of analysts’ estimates with its net profit increasing 37.07% y-o-y at Rs 811.14 crore during April-June quarter on the back of substantial jump in revenues due to improved load factor and recovery in yields during the summer holiday season. This was the highest ever quarterly profit reported by the company. Revenues during the period increased 25.64% y-o-y to Rs 5752.91 crore.
The April-June quarter is usually regarded as a good one for airline companies due to the holiday season. The operating profit or the EBITDAR (earnings before interest, tax, depreciation, amortisation and rentals) increased 26.26% y-o-y to Rs 1,961.75 crore. On the back of higher fuel cost, rentals and other expenses the overall cost during the period increased substantially. Fuel cost – almost 40% of the total input cost – increased 28.6% y-o-y to Rs 1,759.6 crore while the aircraft and engine rentals increased 19.78% y-o-y to Rs 853.69 crore. Other expenses also increased by 21.78% y-o-y during the quarter.
Key operating metrics like load factor increased to 88% during the quarter from 83% in the corresponding period last year. The yields also improved by 2% y-o-y to Rs 3.83 after three quarters. Overall capacity or average seat kilometre (ASK) grew by 18.7% y-o-y to 15.08 billion which was less than the company’s guidance of 22% due to the grounding of the A320 Neo aircraft because of the faulty Pratt and Whittney engines. “We are reducing our capacity growth guidance to 15% for Q2 and 20% for the year because of the grounding of some of the existing A320 Neo aircraft and the delayed delivery of the new ones. We will have to go to the lease market to get new aircraft to compensate the loss,” said Rohit Phillip, chief financial officer, Indigo in an analyst conference.
The management claims to have received compensation from engine manufacturer but refused to disclose the amount. In the days to come Indigo will change its aircraft acquisition policy from short term sale and lease back (SLB) to purchase of aircraft. According to Aditya Ghosh, president, Interglobe Aviation, there will be a mix of both SLB and fully owned aircraft in the fleet. The change in the acquisition model may take place in the current financial year and depends on obtaining certain clarifications under the new GST law.
“Change in the acquisition model will lower the operating cost since rentals for short term leases are high and cash flow generation will become even stronger. We will try to generate cash internally and borrow some funds for buying the aircraft. From now on, the board will take into consederation the use of cash to buy aircraft while deciding on the dividend,” explained Rohit Phillip.