3 min read.Updated: 23 Jan 2019, 11:50 PM ISTRhik Kundu
High fuel costs, weak rupee, increase in plane rentals weigh on airline in third quarter
Total costs during the quarter climbed 51% to ₹8,038.48 crore. Fuel costs surged 69% to ₹3,410.4 crore
Mumbai:InterGlobe Aviation Ltd which runs IndiGo, India’s largest airline by market share, has posted a 75% drop in net profit for the fiscal third quarter, weighed down by higher jet fuel costs, a weak rupee and an increase in plane and engine rentals.
The quarterly performance, however, improved upon the net loss reported by the carrier in the second quarter, the first since it went public in November 2015.
IndiGo, one of the biggest customers worldwide for Airbus SE, recorded a profit of ₹190.88 crore in the three months to 31 December. The figure surpassed the ₹159.70 crore consensus estimate of nine analysts surveyed by Bloomberg.
The airline, which increased its capacity by a third in the last quarter, recorded a 28% year-on-year rise in revenue to ₹8,229.37 crore in the December quarter, topping the ₹7,965.80 crore estimated by analysts.
“The profits fell due to a rise in fuel price and a fall in rupee (against the dollar)," IndiGo’s chief financial officer, Rohit Philip, told analysts in a conference call to discuss the quarterly earnings. He said the last quarter saw an improvement in ticket bookings in the 0-15 day window, considered a key revenue-earning window for airlines as such tickets cost more than those bought earlier.
“… we find that the markets we serve are responding very positively to this new capacity. That is evidenced by the fact that after continued weakness in October which pulled down our overall quarterly performance, our RASK numbers have improved in November and December," IndiGo’s co-founder and interim chief executive, Rahul Bhatia, said in a statement.
RASK, or revenue per available seat, is a unit of measurement commonly used to compare the efficiency of airlines.
Total costs during the quarter climbed 51% to ₹8,038.48 crore. Fuel costs surged 69% to ₹3,410.4 crore.
The airline said it expects capacity to grow 34% in the current quarter as it continues to take delivery of at least one Airbus A320neo aircraft per week.
“Going ahead, a lot of our future capacity will be dedicated to the international routes," IndiGo’s principal consultant Ronojoy Dutta, said at the analysts call.
IndiGo took delivery of 19 Airbus aircraft in the December quarter. It added 55 Airbus aircraft in the past year, and is expected to induct more new planes at the same rate this year as well in order to replace some of its older planes.
The airline has converted a portion of its orders for 430 A320neo planes into A321neo orders. It will take delivery of a “large number" of A321neo planes in the next financial year, said Philip.
The A321neo planes have more seats and fly a longer range than the A320neos.
“A321 aircraft will be mostly deployed on international routes and trunk routes on domestic sector," Dutta said.
IndiGo’s plan, going ahead, is to strengthen its operations in metro cities, as well as in tier 2 and 3 cities and towns across the country. The airline, which has a strong domestic network, will also focus on international expansion to destinations that can be served by its fleet of Airbus planes, typically at a flying distance of about six hours.
“Domestic market will take in only 18-20% of the capacity increase while the rest will be assigned to international (routes)," Dutta said, adding that the main focus of the airline will be to grow its revenue.
IndiGo, which saw several of its aircraft grounded due to glitches in the Pratt & Whitney engines on its A320neo planes, hopes the situation will get resolved soon.
“DGCA (Directorate General of Civil Aviation) has asked us for some more checks, though the situation is under control," IndiGo’s chief operating officer Wolfgang Prock-Schauer said at the call.
“We don’t see any restrictions to fly the aircraft (A320neo) on international routes. Also, about 40 Airbus A320ceo aircraft in our fleet now have ETOPS (extended range, twin-engined, operation, performance, standards) and can be used for international operations," Prock-Schauer added.