IndiGo Q1 profit soars to record

InterGlobe Aviation Ltd, the operator of India’s largest airline IndiGo, reported record quarterly profit and revenue on robust demand for air travel, lower fuel costs, and favourable foreign currency movement.

Net profit rose to ₹3,090.6 crore in the quarter ended 30 June from a loss of ₹1,064.3 crore. Total income rose by 32% to ₹17,161 crore from a year earlier.

The airline also said it plans to make early investments in aviation-related companies, and will look at acquiring assets such as aircraft and engines to make better use of its cash flows. As of 30 June, India’s largest airline had free cash amounting to ₹15,691 crore, up 89% from the previous quarter.

“Given our strong liquidity position, we are also planning to invest in some aircraft and related assets. Further, subject to regulatory approvals, we are also planning on launching a venture capital arm to invest in early-stage firms operating in aviation, consumer-focused and allied sectors such as travel, lifestyle, hospitality, and transportation. Given our large consumer base, we believe these investments will help us add value to the airline,” chief financial officer Gaurav Negi told analysts in the post-earnings conference call.

Out of the 316 aircraft in its fleet, IndiGo owns 14 and 300 are on operating lease while two are on wet lease, where an aircraft is leased along with crew. The airline’s management stated that while acquiring assets such as engines and aircraft did not make sense once covid pandemic impacted the business, the positive business sentiment over the last three quarters has led to this change in strategy. The airline has reported a cumulative profit of ₹5,421 crore over the three quarters spanning October 2022 until June 2023.

“We will look at investing ₹7 crore in the venture capital business to begin with. Internal discussions are happening. This is a directional view. We haven’t decided on how much capital we want to allocate to that,” Negi added.

The airline flew a record 300,000 passengers on any single day in May, its highest daily air traffic so far. Overall, the airline flew 26.2 million passengers in the quarter, up 30% from a year ago.

Total expenditure fell by 0.1% to ₹14,070 crore from a year earlier. While fuel expenses declined by 13% to ₹5,228 crore, non-fuel expenses rose over 9% to ₹8,842 crore in the quarter.

Travel sentiment in the June quarter of FY22 was weak as the economy was recovering from the impact of the Omicron variant of covid-19. As a result, the company reported a loss of ₹1,064.3 crore and a total income of ₹13,018.8 crore in the same quarter a year ago.

Yield, or revenue earned per paying passenger flown per kilometre (km), was at ₹5.18 per km, 1.2% less than the year-ago figure of ₹5.24 per km. In the preceding March quarter, the airline reported a yield of ₹4.85 per km.

For the quarter under review, average daily air passenger traffic in the Indian civil aviation market was recorded at over 424,000 air passengers, higher than the daily air passenger traffic in the pre-pandemic year of 2019 and even higher than the previous quarter of the last fiscal, according to data from the Directorate General of Civil Aviation.

The airline also made history in June by ordering 500 aircraft. As a result, the airline currently has 980 aircraft to be delivered from now until the middle of the next decade.

The airline’s management reiterated that it wants to expand international operations in the 5-6 hour flying range to add new routes and increase depth in the overseas segment. It will soon launch flights to Tbilisi, Baku, Tashkent, Almaty, Nairobi, and Jakarta.

On the latest issue related to Pratt & Whitney engines, the airline said it expects that a “single-digit” number of engines will be removed from the airline’s fleet for inspection under the first phase by the US-based engine maker.

On the recent penalty of ₹30 lakh by the regulator following four tail-strike incidents in Airbus A321 aircraft, the airline said it is investigating the tail-strikes.

“We are evaluating the DGCA notice and considering what should be the next steps on this. We continue to optimize procedures and processes in order to move forward. Safety is of paramount importance to IndiGo,” chief executive officer Pieter Elbers said.

The airline added that following the suspension of Go First on 3 May, there was an overlap of around 15-20% of routes where there was an impact of Go First suspension. While the airline received some slots at airports following Go First’s suspension, it is awaiting clarity from stakeholders in the following weeks and months on the status of those slots as Go First attempts to resume flights.

The airline reiterated that it aims to double its size and scale by the end of the decade and plans to increase the passenger traffic on its network to 100 million in the current financial year. It carried 85.6 million passengers in 2022-23. On the matter of dividends, IndiGo said that it is trying to get back to positive net worth status to address the topic of dividends.