Plunging profits: IndiGo reports Rs 652-crore net loss

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New Delhi | Published: October 25, 2018 5:16:09 AM

Interglobe Aviation on Wednesday reported net loss of Rs 652 crore for the quarter ended September against a profit of Rs 551 crore in Q2FY18.

IndiGo, IndiGo net loss, New Delhi,  indigo Q2FY19, ATF prices, indigo Q1FY19 resultsHigh fuel costs, rupee depreciation and intense competition leading to low fares hurt the airline’s financials.

Interglobe Aviation on Wednesday reported net loss of Rs 652 crore for the quarter ended September against a profit of Rs 551 crore in Q2FY18. High fuel costs, rupee depreciation and intense competition leading to low fares hurt the airline’s financials. During Q1FY19, Indigo had reported 97% dip in net profit to Rs 28 crore due to same factors. The revenue from operations was up 17% y-o-y to Rs 6,185 crore in Q2FY19 vs Rs 5,291 crore in Q2FY18 on the back of strong passenger growth. Indigo’s domestic passenger traffic rose 32% y-o-y to 14.5 million between June-September 2018.

However, this did not translate into better financial results as costs soared for the largest domestic carrier. The fuel bill, which constitutes 40% of the airline’s expenditure, rose 84% y-o-y to Rs 3,035 crore during Q2FY19. According to oil marketing company Indian Oil, the aviation turbine fuel (ATF) prices were up 42% y-o-y to Rs 68,879 per kilolitre in New Delhi during Q2FY19. The Gurugram-based company added capacities to the tune of 29% y-o-y; raised available seat kilometres (ASKs) from 15.1 billion to 19.5 billion in the period under review even as it reported flat passenger load factor at 84.5% in Q2FY19 vs 84% in Q2FY18. The value of rupee was down 11% y-o-y to Rs 71 per US dollar during the September quarter.

The airline yields were down 10% y-o-y due to low fare scenario in the domestic market. It reported an yield of Rs 3.21/km in Q2FY19 against Rs 3.56/km in the same quarter last year. Indigo’s earnings before interest, tax, depreciation, amortization and rent costs (Ebitdar) plummeted 86% y-o-y to Rs 220 crore in Q2FY19 from Rs 1,581 crore in Q2FY18. The Ebitdar margin was down 88% to just 3.5% vs 30% during the September quarter a year ago.

Balu Ramachandran, head of air and distribution, Cleartrip, said the average domestic fares were down around 7% y-o-y during Q2FY19 due to high intensity competition among airlines. After the Q1FY19 results, Indigo management had expressed concerns over the unsustainable fare levels especially spot fares for which the airline could not command premium rates. The worry continued for Indigo in the second quarter too as fares remained low in the 0-15 days travel period.

“The yields during the 0-15 days period remain weak due to intense competition. We see the strong demand for air travel to continue and we are scaling our operations to meet it,” Rahul Bhatia, co-founder and interim CEO, Indigo, told analysts during the post-earnings call. “We are not leading the charge for the low fares in the industry. There are players in the market that are hurting, and to raise short-term cash are lowering fares and we have to match them,” he said.

The airline also revised its capacity expansion guidance from 25% to 30% y-o-y for 2018-19 on the back of strong passenger growth. “We expect y-o-y capacity increase in Q3FY19 to be 35% and revise our capacity guidance for FY19 at 30%. This is largely due to ramp up in deliveries by Airbus, starting with A321neos from November,” Bhatia added. In FY18, Indigo had reported a net profit of Rs 2,242 crore, up 35% y-o-y. It controls about 42.3% of the domestic aviation market with 189 aircraft and 1,294 daily flights.

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