IndiGo eyes future capacity growth despite quarterly loss

IndiGo’s chief executive Rono Dutta is expecting his carrier to increase capacity by 40 percent for the coming quarter, even as the carrier reported a higher net loss for the quarter between July and September 2021. In an earning calls transcript released by the Indian low-cost carrier, Dutta attributed multiple factors that took place in the quarter that prompted it to raise capacity. This includes a fall in the number of COVID-19 cases in India, an increased pace of vaccination against the coronavirus, a relaxation of testing rules by the various Indian states, as well as a gradual removal in capacity caps by the Indian central government and expansion of travel bubble arrangements with other countries. But beyond the expected increase in capacity, Dutta expressed concern at the rising cost of fuel, where fuel prices are now averaging $85 per barrel, as compared to the average price of $65 per barrel prior to the COVID-19 outbreak. “Things are looking better on the revenue side but the increase in input costs are cause for concern,” says Dutta. While losses incurred in previous quarters have “dented” its balance sheet, IndiGo’s chief executive appears to be banking on capacity growth in a bid to return to profitability. “Now that it looks like we are finally emerging out of the COVID crisis, we are turning our attention back to the two key principles of our business model, namely: continue to keep our costs down and grow rapidly,” says Dutta. “To summarise, revenues are fast returning to normalcy, fuel prices are worrisome, we need a rapid return to profitability in order to strengthen our balance sheet and we are excited about the growth opportunities that lie ahead of us.” IndiGo’s second-quarter financial results statement (IndiGo’s financial period runs from April to March) shows that the carrier posted a net loss of Rs 14.36 billion, a 20.2% year-on-year increase as compared to the Rs 11.95 billion loss for the same quarter in the previous financial year. The results statement indicate a rise in operating expenses such as fuel and aircraft maintenance had contributed to the higher loss. The carrier’s press release on the results specified total revenue was up 91.4 percent to nearly Rs 58 billion, as higher income from passenger tickets and ancillary sales helped to offset declines from other sources of income. Meanwhile, chief financial officer Jiten Chopra was quoted in the earnings transcript as saying that for the July-September quarter, IndiGo operated around 61 percent of its capacity, based on levels seen before the COVID-19 outbreak. This is higher than the 44 percent of capacity that was operated between the April-June 2021 quarter. In comparing the quarter that ended in September 2021 versus that of June 2021, Chopra goes on to say the higher capacity deployment has resulted in its load factor rising 12.4 points to 71.1 percent. Yields were up 20.4 percent to Rs 4.19, and cost per ASK excluding fuel fell 27.3 percent due to the higher capacity deployed, and what Chopra calls a “positive impact of foreign exchange movement”. Chopra adds IndiGo had Rs 63.5 billion in free cash at the end of September. “With the impact of the second wave abating and additional capacity deployment, we are likely to show an improving trend in all performance metrics in the forthcoming quarters. We continue to focus on keeping our costs under control and providing world-class services to our customers,” says Chopra. In terms of fleet, IndiGo’s earnings presentation shows that as of 30 September, there was a net increase of two aircraft during the July-September 2021 quarter. It took delivery of 11 Airbus A320neo family aircraft and four ATR 72s, while phasing out 13 A320s from service.

No results