"IndiGo posted weak Q4 results as yields failed to offset the cost pressures," Morgan Stanley said about the results announced yesterday.
Shares of InterGlobe Aviation Ltd, owner of the country’s largest airline, IndiGo, fell 3.35 percent today to Rs 1,102.10 on the NSE, the biggest intraday percentage fall for the scrip in last 11 trading sessions. This poor show came on the back of weak results announced by the company for the fiscal fourth quarter.
Interglobe Aviation on Tuesday reported a net profit of Rs 440 crore for the three months to March, on-year basis drop of around 25%. The company, which runs the IndiGo airline, notched up revenues of Rs 4,848.2 crore in Q4FY17, an increase of 18.5% on-year basis but a substantial jump in fuel costs (71%) and higher rentals drove down profits. “IndiGo posted weak Q4 results as yields failed to offset the cost pressures,” Morgan Stanley said about the results announced yesterday.
During the quarter, increase in the price of fuel, which comprises 40% of the operating cost, increased by a whopping 71% on-year basis to Rs 1,750.5 crore. As a result of the increased fleet size, the aircraft rentals also jumped by 21.4% on-year basis to Rs 824.1 crore. The no-frills carrier also registered a 16.47% on-year basis increase in other expenses and 8.4% on-year basis increase in employee benefit expenses.
As a consequence of higher expenses, the operating profit or EBITDAR (earnings before interest, tax, depreciation, amortisation and rental) decreased by 6.61% on-year basis to Rs 1,449.10 crore. Margins fell 700 basis points to 29.9% from 37.9% from the year-ago period. As a result of the increase in capacity and cost, yields during the quarter fell 4.2% on-year basis to Rs 3.50.
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“The yields during the year was down by 10% but things improved in February and March since fare prices increased as a result of increasing oil prices. There will be a lag between capacity growth and passenger growth in the short term but in the long term we see huge opportunities,” said Aditya Ghosh, president, Interglobe Aviation.
The carrier had added five new A320 neo aircraft in the last quarter of FY17 and the average seat kilometer during period rose 24.2 % on-year basis to14.12 billion. The low cost carrier ended FY17 with a 16.46% on-year basis decrease in net profit to Rs 5,440.8 crore. Revenue from operation during the year increased by 15.12% on-year basis to Rs 1,8580.5 crore while EBITDAR slipped by 4.2% on-year basis to Rs 5,440.8 crore.
The company also announced the purchase of 50 small ATR aircraft for $1.3 billion; the planes will be flown on Tier II and Tier III routes. The current fleet size of the airline stands at 131 narrow-body aircraft from Airbus and the management indicated that the total capacity will increase to 170 aircraft by March 2018. The management also indicated that the airline will set up separate operations for the ATR 72 aircraft.