IndiGo’s Q1 net profit falls 96.6%

InterGlobe Aviation, which runs budget carrier IndiGo, posted a 96% fall in net profit for the April-June quarter. The airline blamed a weak rupee, competitive fares, higher maintenance and fuel costs for the steep fall in net profit to Rs 27.8 crore from Rs 811 crore in the year-ago period.

However, reassuring the investors in an earnings call on Monday, Rahul Bhatia, promoter of the Gurugram-based airline, added that IndiGo will be able to cope with the pressures in the industry because of its “lowest cost structures and strongest balance sheet”. “The current revenue environment continues to remain weak particularly in the 0-15 day booking window. While we spoke about some signs of improvement in the last call, the fares continued to be lower in the quarter compared to the same period last year. We do not believe that these fare levels are sustainable, especially given the increase in input costs,” he added.

The airline’s sales from operations rose 13.2% to Rs 6,512 crore in this quarter from Rs 5,752.9 crore a year ago. However, the expenses, too, rose 40.5% to Rs 6,788 crore, and fuel costs shot up by 54.5% to Rs 2,716.6 crore.

The revenue available per seat kilometre (RASK) in this quarter was Rs 3.70 compared to Rs 3.82 a year ago—a decline of 3.1%, while the cost available per seat kilometre (CASK) rose by 19.8% to Rs 3.69 from Rs 3.08 a year ago.

“This decline in RASK was primarily driven by lower yields, partially offset by higher load factors. Over time, as our older planes get replaced by A320neos, in addition to the fuel burn advantage, we expect to see a reduction in our maintenance costs as well. Further, as we start getting larger A321neos, our unit costs will further reduce. We also continue to optimise our cost structure by improving efficiency and leveraging our scale,” he added.

It should be noted that the airline has also ditched its sale-and-lease policy and now plans to buy aircraft directly from the manufacturer. The airline has a fleet of 169 aircraft including 124 A320ceos, 36 A320neos and nine ATRs. It currently flies to 52 destinations including eight international cities. The company plans to commence operations on long-haul routes by the year end to destinations such as Paris, London, Milan, Amsterdam and others.