Covid Crisis Pushes IndiGo to Even Bigger Quarterly Loss
(Bloomberg) -- IndiGo, one of Asia’s biggest budget airlines, reported a wider-than-anticipated loss over the weekend as passenger traffic shrank with the coronavirus tearing through India.
The carrier, operated by InterGlobe Aviation Ltd., posted a loss of 11.5 billion rupees ($157 million) in the three months through March, its fourth quarter, widening from a loss of 8.7 billion rupees a year earlier. The average forecast from analysts was for a deficit of 4.5 billion rupees.
IndiGo’s revenue performance will deteriorate in the quarter ending June compared with the March quarter, Chief Executive Officer Ronojoy Dutta said in a conference call Monday. IndiGo is expecting domestic travel to reach February levels by the third quarter of 2022, while near-term outlook for international recovery is weak and has been delayed till the fourth quarter of 2022, Dutta said.
IndiGo is working on securing credit lines from lenders and entering into sales and leaseback arrangements for new aircraft, which will result in additional liquidity of 45 billion rupees for the coming year, IndiGo Chief Financial Officer Jiten Chopra said. IndiGo’s fleet count will be flat as it’s taking deliveries and returning new aircraft at the same speed, Dutta said.
“This has been a very difficult year with our revenues slumping hard due to Covid, showing some signs of recovery during the period December to February and then slumping again with the second wave of Covid,” Dutta said in a statement Saturday. “While we have seen a sharp decline in revenues in March through May, we are encouraged by the modest revenue improvements starting last week of May and continuing through June.”
The pandemic has pushed many airlines around the world to the brink and beyond, and the intensity of the outbreak in India has made it extra hard for operators there. The country’s carriers will need about $5 billion to survive, but they only have access to about $1.1 billion through share offerings and other means, according to CAPA Centre for Aviation. IndiGo and Air India Ltd. will account for the bulk of the $8 billion in losses by 2022, CAPA said.
India had for a while been fairly robust for airlines thanks to its vast domestic network, though any positivity evaporated with the arrival of a devastating virus wave, which put the brakes on travel. The numbers are staggering, and likely under-reported. Latest data show nearly 30 million confirmed Covid-19 cases and more than 349,000 deaths.
Mark D Martin, CEO of Martin Consulting, said he expects IndiGo to return to profit in the year through March 2023 if India manages to curb the virus.
IndiGo said traffic, measured by revenue passenger per kilometer, dropped 29% in the first three months of 2021 from a year earlier. It filled 70.2% of its seats in the quarter, compared with 82.9% a year earlier. The carrier had 185.7 billion rupees of cash and 298.6 billion rupees of total debt as of March 31.
InterGlobe’s shares pared early gains Monday to close little changed at 1,755.45 rupees in Mumbai.
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“We have run out of words to describe the state of Indian airlines,” CAPA said in its India Airline Outlook last week. “But as we have repeatedly emphasized, the industry is standing on the edge of a cliff. This is true even for airlines with access to large pools of capital.”
IndiGo had been planning last year to raise as much as 40 billion rupees by selling new shares, getting board approval in August. It then dropped the plan in January, saying internal sources of cash would be sufficient as demand started to recover. That optimism was soon snuffed out as India’s outbreak intensified. The board is now considering raising capital again.
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