IndiGo To Cut More Costs To Tide Over ‘Tough’ Period
India’s largest airline is taking additional steps to reduce fixed costs as it stares at a “tough” period, with the Covid-19 outbreak bringing global aviation to a standstill.
“We’re in uncharted territory,” Ronojoy Dutta, chief executive officer of InterGlobe Aviation Ltd., IndiGo’s parent, said during a post-earnings conference call on Wednesday evening. Dutta said the airline is focusing on strengthening liquidity and is working on cost structures as it takes various initiatives to reduce fixed costs.
IndiGo, which posted a loss of Rs 2,844 crore in the quarter ended June compared with a profit of Rs 1,203 crore in the year-ago period, is going through a crisis of survival and cash balance remains its “number one priority”, Dutta was quoted as saying in a statement.
To be sure, the airline has already cut costs by reducing its workforce and cutting salaries for highly-paid staff, like other airlines across the world.
That apart, the airline is looking at cutting costs like lease rentals and other fixed costs that account for a quarter of overall expenses. It also expects to reduce its wage costs by about a third by the end of the financial year compared with the pre-Covid period.
Already the measures have helped the airline to reduce daily cash burn to Rs 30 crore in June from about Rs 40 crore at the beginning of the pandemic, Aditya Pande, the airline’s chief financial officer, said. “As our operations scale up, we expect our cash contributions to increase further, helping our liquidity position.”
IndiGo, which the biggest customer for Airbus SE’s A320neo jets, also plans to raise an additional Rs 2,000 crore through sale and lease back of assets and obtaining moratorium on aircraft refinancing, Pande said. The airline’s board would meet on Thursday to discuss on the fundraise, he said.
This is on top of Rs 3,000-4,000 crore the company had said it would save by limiting expenditure by negotiating favorable terms, among others.
Dutta said IndiGo can manage revenue better if the government’s cap on air ticket prices is removed.