IndiGo Q4 profit falls 73% to Rs117.6 crore on lower yields, fuel costs
Mumbai: India’s largest airline IndiGo on Wednesday said net profit for the March quarter fell 73% from a year ago on costlier fuel, lower yields and aircraft groundings.
The airline, run by InterGlobe Aviation Ltd, reported a net profit of Rs117.64 crore during the quarter, down from Rs440 crore a year ago.
Revenue, however, grew 17.8% from Rs5,141.99 crore a year ago to Rs6,056.84 crore in the latest quarter. Fuel cost during the quarter rose to Rs2,338 crore from Rs1,751 crore a year ago.
IndiGo said its finance income during the March quarter earned from fixed deposits and mutual funds stood at Rs248 crore.
For the fiscal year 2017-18, IndiGo reported a profit of Rs2,242.37 crore, up 35% from Rs1,659.19 crore in 2016-17. The airline’s revenue stood at Rs23,967.74 crore during FY18, up 23.74% from Rs19,369.57 crore in FY17, as the airline flew more passengers during the year and benefitted from relatively lower oil prices during the first couple of quarters of the year (FY18).
The company said in a statement to the BSE that its latest numbers include certain credits received from manufacturers to offset impact of aircraft groundings and delivery delays. The company, however, didn’t reveal details on the same.
According to a person aware of the matter, IndiGo made Rs150-180 crore on the account of sale and leaseback of aircraft during the March quarter. The airline didn’t reveal the compensation it received from Pratt & Whitney due to the grounding of some of its Airbus planes during the quarter. During January-March, IndiGo had grounded 11 Airbus A320 Neo aircraft due to engine glitches. The airline leased aircraft during the period to ramp up its capacity.
IndiGo’s management told analysts after the results that it will continue to purchase aircraft using free cash available in its balance sheet, bringing down costs further during 2018-19.
“The revenue environment may remain volatile but we will keep our cost down to the lowest amongst our peers,” the airline’s chief financial officer said Rohit Philip told analysts.
IndiGo blamed its low yields on industry’s practice of discounting tickets. The current level of fares which has led to lower yields and the current fuel price were not sustainable, Philip said.
“Yield decline has been seen across all airlines and across both domestic and international segments. Our low-cost structure will help in withstanding the short-term pressures,” Philip said, adding that the yields have been firming up during the last fortnight but it’s not clear yet if this holds up.
IndiGo’s co-founder Rahul Bhatia told analysts that the airline will not shrink its capacity but expand further, despite the fall in profit.
The government’s decision not to sell Air India’s international operations as a stand-alone product will not have an impact on IndiGo’s plans to fly long haul destinations. “We will continue to look at long haul operations (without considering buying Air India), and are internally discussing about our plans to add wide bodied aircraft to our fleet,” Bhatia said.
Airbus, which had stopped deliveries of its Airbus A320 Neo aircraft, will resume deliveries later this month, Phillip said.
The airline had leased several Airbus A320 CEO (current engine option) aircraft to ramp up its capacity while several of its planes were grounded due to the engine glitch.
Going ahead, IndiGo hopes to seamlessly operate three different kinds of planes – turboprop (ATR), narrow-bodied (Airbus A320/A321) and wide-bodied fleets respectively – and keep its costs low at the same time.
The airline expects to save on fuel costs by inducting new Airbus A320 Neo (New Engine Option) aircraft, which saves up to 15% on fuel as compared to other narrow-bodied aircraft. The airline also hopes to pay lower fees as landing fees as its turbo prop operations with ATR fleet takes off in coming months.