India’s largest airline, IndiGo, declared its results for the third quarter of the fiscal year ending March 2022 (period October – December 2021), and it showed the green shoots of recovery that the whole aviation industry is interested in. IndiGo’s net profit for the quarter was INR 1,298 million ($17.36 million) and EBITDAR of INR 19,955 million ($266.27 million) for the quarter ended December 2021 on a consolidated basis. For comparison, IndiGo had a net loss of INR 14,357 million ($192 million) in the quarter ended September 2021, and on a year-on-year basis, INR 6,201 million ($82.93 million) in the quarter ended December 2020. 

As domestic aviation in India opened up, in spite of huge constraints on international operations, IndiGo swung to profit after many quarters of losses. A decline in Covid-19 cases and removal of capacity restrictions resulted in buoyant traffic numbers. IndiGo stated that they were able to add capacity to take advantage of the ongoing recovery.

Recovery trends were seen through the quarter

Within the quarter, October ’21 was a relatively weak month, but strong momentum built up through November and December 2021, on the back of festival travel in India and the loosening up of the travel requirements. However, IndiGo CEO Ronojoy Dutta commented, that during the latter part of December, revenues started declining because of omicron. IndiGo achieved strong pricing levels & high load factors of about 80 percent during the quarter.

System-wide, IndiGo deployed approximately 45% more capacity, sequentially, reaching about 88% of pre-covid capacity for the quarter and about 97% of pre-covid capacity in the month of December. Load factors increased to 79.7% in the December quarter compared to 71.1% in the September quarter. Yields increased by 5.2%. These drivers led to a RASK improvement of 13.5% sequentially to INR 4.09 rupees. Higher yields and higher capacity deployment resulted in sequential revenue growth of 63.5%.

While international capacity is still restricted for travel in and out of India, with the gradual addition of bubble flights, International capacity deployed grew by almost 80%, quarter over quarter and bookings grew by 95%.

Costs reduced on the back of increased capacity deployment

On the cost side, IndiGo reported a CASK of 4.03 rupees, 10.7% lower sequentially in spite of increased fuel costs. Higher capacity deployment helped reduce the unit cost. IndiGo operated their plans for 10.7 hours as compared to 7.7 hours in the previous quarter. As per the airline, they can further take up the capacity deployment to 13 hours per aircraft once international travel from India opens up. Fuel continued to be a significant headwind and as a result, the fuel CASK went up by almost 13% on a sequential basis.

In line with its fleet modernization program, IndiGo continued to replace Airbus 320CEO aircraft with NEO aircraft. During the December quarter, IndiGo inducted 18 NEO aircraft and returned 16 CEO aircraft. IndiGo is committed to returning most of the CEO aircraft by the end of December 2022.

IndiGo signs two-way codeshare with Air France-KLM

After sewing up arrangements with Turkish Airlines, Qatar Airways, and American Airlines, IndiGo signed a codeshare agreement with Air France-KLM. Unlike the other arrangements, this is a two-way codeshare agreement and will help IndiGo gain access to new markets. 

IndiGo cut capacity due to the third wave

Ronojoy Dutta, on the analyst call, also brought up the cutback to capacity in the current quarter (January – March 2022) in response to the increase in Covid-19 cases in India. The airline had announced up to 20% capacity rationalization earlier in January 2022, but the CEO expects capacity deployment to be more likely in the range of 10-15 percent compared to the previous quarter. Answering questions from analysts, he remarked that a decline in bookings had begun in mid-December 2022, and he believes that the bottom was formed by mid-January. From there, there has been an upward trend observed. 

In terms of revenue, IndiGo predicted a decline in revenue in Q4FY22 (Jan-Mar 2022), but a recovery in the first quarter of FY23 (Apr-Jun 2022).

Cargo Business being developed

Answering questions about the Cargo business, Dutta stated that IndiGo had deployed ten aircraft during the pandemic on cabin cargo duties, with seats being removed, however, with a recovery in the passenger business most of these aircraft were called back and the current cargo fleet is limited to three aircraft. Cargo is a developing business for the airline, as the CEO states, there are a lot of factors working in India’s favor, including regulations changes that disallow international carriers from flying cargo around India domestically and with the shipping crisis globally, allowing IndiGo to pick up and move a lot more Cargo than pre-pandemic opportunities.

IndiGo currently has signed up for four P2F conversions and will pan out a longer-term strategy in the coming times as it grows the cargo business.  

IndiGo appoints Rahul Bhatia as Managing Director

In a filing to the exchanges, IndiGo also confirmed the appointment of the promoter, Rahul Bhatia as the Managing Director of IndiGo here on. This comes along the lines of the recent Emergency General Meeting of the company, where the right-of-first-refusal for sale of shares was removed, and IndiGo’s co-founder Rahul Gangwal now has the liberty to exit the company if he so wishes. 

Mr. Bhatia stated that his agenda would be transformational and would focus on expanding the airline’s presence in India and in international markets and building for the long term. It was not immediately clear as to how duties between him and the CEO would be divided. 

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Ajay Awtaney
ajay@livefromalounge.com | + posts

Ajay Awtaney is the Founder and Editor of Live From A Lounge (LFAL), a pioneering digital platform renowned for publishing news and views about aviation, hotels, passenger experience, loyalty programs, travel trends and frequent travel tips for the Global Indian. He is considered the Indian authority on business travel, luxury travel, frequent flyer miles, loyalty credit cards and travel for Indians around the globe.

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