Q2 results: IndiGo posts first loss since going public

Mumbai: InterGlobe Aviation Ltd, which runs India’s largest budget airline IndiGo, swung to its maiden quarterly loss since it went public, as sharply higher jet fuel prices and a weak rupee outweighed an increase in passenger traffic. IndiGo posted a loss of ₹ 652.13 crore in the September quarter (Q2) as compared to a profit of ₹ 551.56 crore a year ago.

InterGlobe Aviation listed on the stock exchanges in November 2015.

IndiGo was also hit by lower yields and adverse foreign exchange fluctuations in the quarter.

Higher fuel prices and a weakening rupee have swelled operating costs at Indian carriers. A weak rupee adds to the woes of airlines as most of their expenses are dollar-denominated. In the past year, the benchmark Brent crude has gained 33.3% to $76.48 a barrel, while the rupee has weakened 11.1% to 73.16 to a dollar.

Total revenue rose 18% year-on-year to ₹ 6,514.20 crore in Q2 as it carried more passengers. The growth in traffic came at the expense of yields as intense competition limited its ability to raise fares enough to sufficiently cover increased costs.

IndiGo, one of the biggest customers globally for Airbus SA, would have made a bigger loss in Q2 had it not been for finance income, income from sale and leaseback of aircraft, compensation for engine snags that led to the grounding of Airbus A320neo jetliners powered by Pratt & Whitney engines. Other income surged 53% from the year earlier to ₹ 328.9 crore in Q2.NextMAds

Total expenses at IndiGo jumped 58% in the September quarter to ₹ 7,502 crore. Fuel expenses soared 84% in the September quarter to ₹ 3,035 crore. It also incurred a foreign exchange loss of ₹ 335.4 crore during the quarter.

Aviation in India is facing significant pressures from high fuel costs, rupee depreciation and intense competition, all of which have impacted our profitability this quarter, IndiGo’s co-founder and interim chief executive Rahul Bhatia said in a statement.

IndiGo carried 14.54 million passengers on domestic routes in the September quarter, up from 11.04 million a year earlier, government data showed.thirdMAds

“The yields received (from ticket bookings) during the 0-15 day window remains weak, which have been accentuated due to capacity addition,” Greg Taylor, IndiGo’s senior adviser said in an analysts’ call to discuss the earnings.

Airlines in India earn more from tickets booked up to 15 days before the date of journey as they normally cost more than those booked months in advance.

The company has adopted various initiatives to increase efficiency and reduce fuel costs by reducing weights (on flights) and improving navigation and landing procedures, chief financial officer Rohit Phillip said during the call. IndiGo is witnessing a ramp-up in delivery of A320neo planes, which were earlier delayed by Airbus due to engine issues, said Phillip. It has currently a fleet of 189 planes including 50 A320neos.fourthMAds

Looking ahead, IndiGo plans to launch more international flights in the coming quarters to tap this lucrative market and offset pricing pressure in its home market of India. The new flights would however be within the range of its current fleet of A320 family of planes.

“Long-haul international flying using wide-body aircraft remains an aspiration (for IndiGo),” said Taylor.

IndiGo, however, does not have any plan to use its cash reserves to order more planes in the coming quarters, said Phillip. IndiGo had a cash balance of nearly ₹ 13,164 crore and net debt of about ₹ 2,641 crore as of end-September.

Meanwhile, Bhatia said IndiGo would prefer to grow its business organically when asked by analysts whether the airline will be interested in acquisitions, especially with the sector burdened with high costs.

“However, if something very good came up, we will look at it,” he added.

On Wednesday, InterGlobe Aviation shares rose 0.80%, or ₹ 6.45, ₹ 817.10 on the BSE while the benchmark Sensex gained 0.55%, or 186.73 points, to end the day at 34,033.96.sixthMAds