IndiGo Q3 Results: Profit Jumps 2.6 Times; FY20 Capacity Growth Guidance Cut

InterGlobe Aviation Ltd.’s quarterly profit rose, beating estimates, on better yields and higher passenger growth.

Profit of the operator of India’s largest airline, IndiGo, rose 2.6 times year-on-year to Rs 490 crore in the quarter ended December, it said in an exchange filing. That’s above the Rs 348-crore consensus estimate compiled by BloombergQuint.

Yields—a measure of average fare per passenger per kilometre—rose to Rs 3.9 per kilometre from Rs 3.8 a year ago. Higher passenger load factor—a measure of seat occupancy—and lower fuel prices also aided the carrier’s bottom line.

That comes as the industry’s air traffic growth rose at the slowest pace in six years in the seasonally strong Diwali festival quarter as Indians cut back on travel in a slowing economy.

IndiGo’s revenue rose 25.46 percent on an annual basis—the slowest pace in five quarters—to Rs 9,932 crore. That compares with the Rs 9,720-crore estimate.

The airline cut its capacity growth guidance for 2019-20 to 20 percent from 25 percent forecast earlier. In December, IndiGo became the first airline to operate 1,500 flights daily—in line with its expansion strategy—compared with 1,000 flights per day a year earlier.

Key Highlights (Q3, YoY)

• Passenger load factor improved to 87.6 percent versus 85.3 percent; passenger growth stood at 22.7 percent.
• Other income rose 27 percent to Rs 399 crore.
• Total debt (excluding capitalised lease) remained flat at Rs 2,351 crore versus Rs 2,378 crore as of September 2019.
• The company added 12 aircraft in the quarter, taking its fleet size to 257.

IndiGo’s operational performance met estimates on a fall in global crude oil prices and higher domestic passenger growth. Earnings before interest, taxes, depreciation, amortisation, and rental costs rose 41.34 percent on an annual basis to Rs 1,804 crore. Operating margin stood at 18.17 percent compared with 16.5 percent a year earlier.

Average fuel prices fell 11.7 percent to Rs 65,223 per kilolitre in the three months ended December. Fuel contributes more than a third to an airline’s total operating costs.

IndiGo’s Conference Call Takeaways

• Unit revenue growth will be challenging in the quarter ending March as base quarter had positive impact of Jet Airways’ shutdown.
• Yields were good in January, but difficult to predict how yields will pan out in February and March.
• The company’s international revenue is close to 25 percent of the total revenue.
• IndiGo has not shifted capacities on international routes due to Coronavirus issues.
• China virus concern is really bad for air travel.
• Non-stop flying from India to U.S. market is very challenging. The company has no plans to fly non-stop India to U.S. market even if it has wide-bodied aircraft.
• No comment on Air India expression of interest.
• Airline growth has currently slowed down due to engine issues and pilots in training.
• The airline will fly at full throttle starting June 2020.

Shares of IndiGo closed 0.4 percent lower ahead of the earnings announcement, compared with a 1.1 percent fall in the Nifty 50 Index.