Steep forex loss prompts IndiGo to eye more foreign flights

The airline's lease costs jumped over tenfold in the September quarter as the rupee fell against the dollar. Since lease payments are made in dollars, a 1.7% depreciation during the quarter caused a forex loss of ₹2,892 crore during the period, IndoGo said, against a forex loss of around ₹240.6 crore a year earlier

The company reported a ₹2,582 crore net loss in the September quarter, against ₹2,176 crore profit in the June quarter, and a loss of ₹987 crore a year earlier.

Chief executive Pieter Elbers said that as a strategy, the airline was looking at “internationalization", which included flying to more destinations that generate “non-rupee revenues" in euros, pounds or dollars. “This provides us with a natural hedge against currency fluctuations," he said.

Revenue fell 10% sequentially to ₹18,555 crore, with international destinations providing a hedge against a slowing domestic market traffic in the seasonally weaker quarter, marked by weather-related disruptions and geopolitical tensions. In the June quarter, revenue stood at ₹20,497 crore. Revenues were up 11% over the year-ago period.

Excluding the impact of forex changes, IndiGo made a profit of ₹104 crore during the September quarter, against a ₹2,347 crore profit in the June quarter, and a loss of ₹754 crore a year ago.

Elbers said during the media call there was a small positive from hedging against the dollar. “Loss on account of currency fluctuations and lease obligations, which were in dollars, saw us move from operating profit to a loss."

The IndiGo fleet had 417 aircraft at the end of the September quarter, one more than in the June quarter, and seven more than a year earlier. Operating and damp lease aircraft saw a decline sequentially, but the airline saw finance lease increase significantly.

Scale-up

IndiGo has also revised its capacity guidance to the “mid-teens", an improvement over the “double-digit growth" it had said at the start of the year.

Elbers said that optimized capacity deployment has already enabled it to deliver a 10% growth in revenue and, excluding the impact of the currency movement, an operational profit of ₹104 crore as compared to an operational loss last year.

“The year began with significant external challenges across the industry, but we saw stabilization in July and a strong recovery through August and September. Looking ahead, we have scaled up our operational plans for the second half to meet demand and continue driving growth. With that, we have nudged up our capacity guidance for the full financial year 2026 to early teens growth," he said.

The second half of the year is being seen as seasonally better for travel, thanks to a spate of holidays and the wedding season.

Grounded aircraft, which include only the Pratt & Whitney-powered planes, continue to remain in the 40s. Elbers expects the situation to have stabilized. “It is stable in the forties. There is no significant impact on the bottomline," he said.

Earlier, the airline had guided that it had passed its peak groundings from the mid-70s in the first and second quarters of the previous financial year.

IndiGo is expected to induct one aircraft every week over the next few years, even as it ramps up the induction of wide-body aircraft, mostly from Airbus, targeting increased long-haul international routes.

Other metrics

The airline's yield fell to ₹4.69 for the September quarter from ₹4.98 in the June quarter and ₹4.55 a year earlier. Yield is the average revenue that the airline earns per passenger, per km flown.

The load factor (carrying efficiency, calculated on the number of seats filled with paying passengers) also decreased by 2.1 points sequentially to 82.5, but remained flat against a year earlier.

For April-June, the available seat kilometres (ASK), a measure of an airline's passenger-carrying capacity, dipped to 41.2 billion, against the sequential 42.3 billion, indicating increased seat capacities. In contrast, the revenue passenger kilometres (RPK) declined sequentially from 35.7 billion to 34 billion, corresponding to a lower passenger load factor. This indicates lower demand.

Total operating revenue generated per seat per kilometre flown, or RASK, fell sequentially to ₹4.55 in the September quarter versus ₹4.86 in April-June and ₹4.45 in the year-ago quarter.

IndiGo had a total cash balance of ₹53,515 crore, comprising ₹38,517 crore in free cash and ₹14,999 crore in restricted cash. The capitalized operating lease liability was ₹49,652 crore. The total debt (including the capitalized operating lease liability) was ₹74,814 crore.