Key takeaways from IndiGo’s $280 million profit

India’s largest airline, IndiGo, announced a near $280 million profit for the quarter ending December and provided strong guidance for the generally weak fourth quarter. Analysts feted the airline’s profit despite an 18% drop from a nearly $340 million profit last year. This profit was despite the depreciating Indian Rupee. IndiGo’s revenues grew 14% yearly to around $2.5 billion in a quarter marked by festivals. Demand was visible in the industry load factor, which stayed above 90% for most of November and December. In a call soon after the results were announced, IndiGo management, led by its CEO, Pieter Elbers, noted that foreign exchange drag was mainly due to lease liability and maintenance obligations. From now on, the firm will take steps towards forex hedges. At this point, IndiGo is looking to hedge 60-70% of the following 12-month payment position (including some natural hedges) and evaluate if it needs to hedge for an even longer duration. This was also the first quarter that the budget airline IndiGo launched a business class on its Delhi-Mumbai route. Elbers said the initial response was promising and suggested healthy revenue potential for the segment. For 2025, the airline plans to roll out business class on 10 more metro routes, totaling 45 aircraft. The airline recorded 2,200 flights daily this quarter despite dozens of its A320s being grounded due to Pratt and Whitney engine challenges. The airline's management said the number of planes grounded has now fallen to “the 60s” instead of “the 70s” earlier. It is expected that this number will drop to 40 by summer. During this quarter, it inducted 33 aircraft. Of these, 23 were from the original order book, eight were on damp leases, and two were from secondary leases. It also redelivered six aircraft, resulting in a net addition of 27 aircraft during the December quarter, bringing its total fleet size to 437. International traffic also continues to perform well for IndiGo. It now accounts for 28% of its overall average seat kilometers (ASK) and 10% of its total revenue. The airline said it is exploring the early introduction of more long-range aircraft on wet leases, which would help it anticipate the needs of that market. IndiGo, which will compete with Air India on those routes besides foreign airlines, has wet-leased six Boeing 787s for the first time to make a formal long-haul debut. Its pre-ordered Airbus A350s are expected to land only by 2027.

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