Domestic traffic growth to bounce back to 10-12%: IndiGo CEO

Even as the Indian aviation sector reported a 2% fall in domestic passenger traffic in the month of April, a first in six years, IndiGo CEO Ronojoy Dutta is confident that passenger traffic would bounce back to reporting double-digit growth soon.

“Looking at our load factors, it [domestic traffic] is bouncing back up nicely. In the short-term we think it will be up by 10 to 12%,” Dutta said on Monday, while announcing IndiGo’s fourth quarter earnings on an analyst call.

“Traffic is very closely linked to capacity — if capacity goes up, traffic goes up and if capacity goes down, traffic comes down. And traffic has gone down, first led by the grounding of the Boeing 737 MAX aircraft and then of course Jet Airways,” added Dutta. With the exit of Jet Airways from the market in mid-April, IndiGo has managed to increase its market share by 5.6 percentage points to 50%, giving it an overwhelming domination of India’s aviation market.

Meanwhile, IndiGo reported a profit of ₹589.6 crore in the January to March period, an increase of 401.2% over the same period a year ago. “Profitability was better during the quarter mainly on account of better revenue performance,” said Rohit Philip, CFO, IndiGo.

The airline’s revenue grew year-on-year by 35.9% to ₹7,883 crore, as the exit of Jet Airways from the market saw a steep rise in airfares. “Overall for the quarter, Jet Airways effectively increased our revenue by 3 to 4%,” added Dutta. “By May, however, as the industry has added capacity in to Jet Airways markets, the effect has started to dissipate and by June I think the effect will pretty much disappear.”

For fiscal 2019, IndiGo’s revenue from operations increased by 23.8% to ₹28,497 crore, while its profit declined by 93% to ₹156.1 crore. “Fiscal 2019 was a tough year for the airline industry in India because of high fuel prices, weak rupee and intense competitive environment. However, it is a tale of two halves for IndiGo, with the first half of the year incurring losses and the second half of the year experiencing a sharp recovery,” Dutta said.

“Looking ahead, it is difficult not to be bullish about the future. We see plenty of opportunities for profitable growth in our network and with a robust delivery stream of new aircraft, we are well positioned to capitalise on this growth,” he added. The company has forecast a capacity of 30% in the April to June quarter of fiscal 2020.

Dutta also announced a dividend of ₹5 per share, which is subject to shareholders’ approval. As of March 2019, IndiGo had a total cash balance of ₹15,308 crore. Shares of the company ended Monday’s trade at ₹1663 apiece, up 2.52%.