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IndiGo reins in loss in Q2 on passengers, cost cuts

IndiGo reins in loss in Q2 on passengers, cost cuts

Mumbai: The disciplined low-fare model adopted by the InterGlobe Aviation Pvt. Ltd-run IndiGo seems to be working: for the quarter ended September, the carrier posted a net loss of Rs6 crore, less than one-tenth the loss posted by its nearest rival in the same period.

SpiceJet Ltd, India’s second biggest low-fare carrier, logged a loss of Rs101 crore in the September quarter. The financials of the third low-fare carrier GoAir, run by Go Airlines (India) Pvt. Ltd, are not available.

A senior IndiGo executive attributed its performance to its “brand new planes" that had helped the airline cut maintenance and fuel costs. Besides, the “lease cost for IndiGo was also very less". He declined to be identified because he is not authorized to speak to the media.

The combined losses at Indian airlines grew 44.4% to Rs8,557.37 crore in the fiscal year ended March, making it the worst year for an industry beset by high costs, excess capacity and a slump in passenger traffic. They are expected to post similar losses this fiscal, according to various market estimates.

According to data furnished by the ministry of civil aviation on 19 November, IndiGo is one of two airlines that made a profit in 2008-09. IndiGo posted a Rs82.16 crore profit for the year, while full-service carrier Paramount Airways Ltd posted a Rs7.26 crore profit. The full-year loss for SpiceJet was Rs352.50 crore. GoAir’s net loss was Rs22.55 crore.

“Most of the costs, including fuel and airport charges, are identical for all airlines. But airlines can do better if they can manage to optimize operational cost such as crew cost, aircraft financing, maintenance, repair, overhaul and others," said Kapil Arora, partner (aviation practice) with audit and consulting firm Ernst and Young.

Another senior executive with IndiGo, also speaking on condition of anonymity, said the airline stuck to its aircraft leasing plan of focusing on short tenures. “There was strict checks and balances in maintaining the planes and effectively using them," he said, without elaborating on other measures that have been used to save costs.

In a separate development, an aviation ministry statement last week said IndiGo owes Rs8.72 crore to the Airports Authority of India (AAI) as outstanding dues. AAI can take action to realize such dues by levying interest on a defaulting airline, encashing bank guarantee(s) deposited as security, and denying it credit.

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