New Delhi: InterGlobe Aviation Ltd, which operates India’s biggest budget airline IndiGo, said its fiscal third-quarter profit dropped 25% because of an increase in fuel costs and lower ticket prices.
Net profit fell to Rs487.25 crore in the three months ended 31 December from Rs657.29 crore a year earlier, the company said.
Revenue rose 16.8% to Rs5,158.42 crore from Rs4,481.20 crore in the year-ago period as the company added planes and operated more flights.
IndiGo controls about 39% share of the domestic market, with 126 planes and 854 daily flights.
In an analyst call on Tuesday, IndiGo said its yields or airfares were down 10% in October, 20% in November, 17% in December and 10% in January year-on-year.
IndiGo president Aditya Ghosh said the airline will continue to match the fares of rival airlines in each “fare bucket” in the coming months as well—a strategy started in the second half of last year.
“We have the lowest cost structure,” Ghosh said.
During the quarter, 71.7% of IndiGo flights were on time. The airline said its operational performance was impacted primarily due to adverse weather conditions, air traffic congestion at key airports and operational issues associated with its A320neo planes.
IndiGo has bet big on the A320neo’s Pratt & Whitney engine. The new engine has been throwing up challenges including startup issues and erroneous technical messages to the pilot since last year when some of the planes were inducted after a long delay. Some other issues are also being fixed, IndiGo said on Tuesday.
“There are certain issues with combustor chamber lining as a result of which we are not getting the engine life that we would have expected,” Ghosh said, adding “There is a redesign that Pratt is implementing to fix this. It has also talked about an issue with the oil seal that have seen some failures. Pratt is working on it.”
He said the delayed delivery of fan blades for the neo engines is also being addressed. The engine is giving 15% fuel savings compared with 14% earlier, he added.
The airline expects to end fiscal year 2017 with a fleet of 133 planes and may induct more next fiscal than initially expected, it said.
Consulting firm CAPA said IndiGo’s net profit per passenger dropped 47.5% to Rs430 in the December quarter from Rs820 a year earlier and predicted challenges to profitability next fiscal.
“Industry will add 60-65 aircraft in FY18 which will increase supply dynamics significantly and with cost creep of over 10% likely, see emerging profitability challenges,” CAPA said. It added that it expected IndiGo to make a profit of Rs1,400-1,600 crore this fiscal.
Shares of InterGlobe Aviation fell 3.36% to Rs900.85 on BSE, while the exchange’s benchmark Sensex shed 0.7% to end at 27,655.96 points.