IndiGo Q4 Profit Misses Estimates As Fuel Expenses Rise

InterGlobe Aviation Ltd.’s profit missed analyst estimates by a wide margin due to higher fuel expenses, lower airfares and foreign exchange losses.

Net profit of budget carrier IndiGo’s parent dropped 73 percent to Rs 118 crore as compared with the same quarter last year, according to its filing with the stock exchanges. That fell short of the Rs 478 crore consensus estimate of analysts tracked by Bloomberg.

The bottom line was hit by a 33.5 percent surge in aircraft fuel expenses on a year-on-year basis. Besides, the airline reported a foreign exchange loss of Rs 92.5 crore as against a gain of Rs 160 crore in the same quarter last year. The net profit was also dragged by lower airfares as the company tried to match prices offered by rivals. IndiGo’s passenger yields – the average fare per passenger per kilometer – fell for the first time in four quarters.

The pressure on passenger yields was seen across the industry because of weak pricing environment, IndiGo said in its conference call. However, in the current financial year, yields have improved, the management added.

IndiGo, the country’s largest airline, has been testing troubled waters for a while now. Earlier last month, the carrier had to ground several of its planes due to technical glitches in engines supplied by Pratt & Whitney engines, leading to a loss of over $600 million in market value. The airline also received flak on account of a few highly publicised customer run-ins with the staff. The latest blow came recently when President and Whole Time Director Aditya Ghosh stepped down from his post.

Revenue of the budget carrier rose 20 percent to Rs 5,799 crore for the quarter. That too fell short of the estimated Rs 6,127 crore. The operational performance was also weak as earnings before interest, tax, depreciation, amortisation and rental cost of the company was down 16 percent - the biggest drop since IndiGo listed in 2015. The operating margin contracted to 19.4 percent from 27.5 percent last year.

Conference Call Highlights

• Carrier is working with Pratt & Whitney for a speedy resolution on A320neo planes.
• IndiGo expects a 25 percent increase in available seat per kilometer in FY19.
• The company will remain focused on curtailing cost.
• Will continue to buy more aircraft with free cash in FY19.
• Will continue the plan for long haul international operations without Air India.