IndiGo Targets Highest Unit Revenue In Four Years In FY20

InterGlobe Aviation Ltd. expects its revenue efficiency to be at its highest in four years in the ongoing financial year as it deploys fleet in a better manner, improves connectivity on international routes and takes initiatives to boost ticket sales.

The operator of IndiGo, India’s largest airline, expects its revenue per available seat kilometre, or unit revenue, to grow 5 percent year-on-year in 2019-20, the airline’s management said in a conference call after earnings for quarter ended March. That would take the reading to Rs 3.75, the highest since FY16.

This growth in unit revenue, coupled with the 30 percent increase in capacity for FY20, would lead to nearly 37 percent jump in revenue, the fastest pace since listing, according to BloombergQuint’s calculation. But the growth is based on assumption that everything else remains the same. If a competitor aggressively increases its capacity and put pressure on flight ticket prices, IndiGo’s unit revenue growth could well be lower and vice versa.

InterGlobe Aviation’s profit jumped fivefold in Q4 as the operator of budget carrier earned higher fare per passenger at a time fuel prices were relatively lower. Profit surged 401.2 percent over the last year to Rs 590 crore in the January-March period, according to its exchange filing. Analyst estimates compiled by BloombergQuint had pegged the profit at Rs 404 crore.

The budget carrier for the first time reported a growth in its unit revenue in the seasonally weak fourth quarter, aided by higher international revenue. Ticket prices were also higher on international and domestic routes because of grounded aircraft of Jet Airways (India) Ltd. Yield, which measures the average fare per passenger per kilometre, jumped the most for IndiGo since listing.

Revenue in April has been even stronger than March due to the Jet Airways crisis, said the company’s management. IndiGo expects the positive impact to fade in June.

For the three months ended March, IndiGo’s total cost per available seat kilometre rose the least in six quarters because of lower fuel prices and fuel-efficient aircraft. Despite a 1 percent drop in jet fuel prices, IndiGo’s fuel economy declined by 6 percent.

Other Conference Call Highlights

• International unit revenue increased 13.6 percent, while domestic revenue per available seat kilometre rose 6 percent.
• Jet Airways’ issues improved unit revenues by 3-4 percent in Q4.
• Has not placed any order for wide-bodied aircraft so far and don’t expect to do it in near future.
• Half of the capacity addition in the future will be towards international routes.
• Has hired 285 Jet Airways’ pilots who will come on board in the next three to six months; expects the number to increase in the coming months.
• IndiGo has bought only 12 ATRs and wants to buy some A320.