Q2 Results: IndiGo Reports First Quarterly Loss Since Listing

InterGlobe Aviation Ltd. reported its first quarterly loss as rising fuel prices, a weaker rupee and competitive fares hurt the parent of India’s largest carrier.

IndiGo, India’s largest and most cost-efficient carrier, reported a net loss of Rs 652 crore in the three months ended September, according to its exchange filings. Analyst estimates compiled by BloombergQuint had pegged the loss at Rs 470 crore. The company booked for tax credits worth Rs 336 crore during the quarter, which lowered the net loss amount for the airline.

Revenue rose 17 percent to Rs 6,185 crore from a year earlier, as IndiGo flew more passengers. That came at the expense of yields as intense competition restricted its ability to raise fares to sufficiently cover higher costs. Its yield, which measures average earnings per passenger per kilometre, declined by 10 percent to Rs 3.21.

“Aviation in India is facing significant pressures from high fuel costs, rupee depreciation and intense competition, all of which have impacted ourprofitability this quarter,” Rahul Bhatia, interim chief executive officer, said. “Despite the difficult environment, IndiGo remains well positioned thanks to our low cost structure and strong balance sheet.”

Earnings before interest, tax, depreciation and amortization and rental cost, a key profitability metric for an airline, declined 93 percent to Rs 111 crore, partly on the back of higher maintenance costs related to old A320neo aircraft. Delay in delivery of A320neo forced IndiGo, one of the biggest customers globally for Airbus, to lease older planes from the secondary market which have higher maintenance costs and burn more fuel.

IndiGo’s cost per available seat kilometre rose for the seventh straight quarter by 24 percent over the year-ago month to Rs 3.74. That was because of a 41 percent rise in jet fuel prices and a 9 percent depreciation in the Indian currency against the U.S. dollar.

For an airline company, fuel accounts for a third of the total expenses which are mostly dollar-denominated.

IndiGo added 20 planes in the September-ended quarter, taking the total count of aircraft in its fleet to 189. It had a total cash balance of Rs 13,164 crore and total debt of Rs 2,641 crore.

Conference Call Highlights

• The carrier wasn’t able to recover higher costs by increasing fares.
• Higher capacity addition further lowered ticket prices.
• Capacity guidance increased due to more deliveries coming from Airbus.
• IndiGo is not leading the lower air fare game in the industry.
• Had to withdraw fuel surcharge implemented earlier due to price competition seen in the market.
• Will stick with the plan of adding capacity.

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