BackIndiGo to push ahead with A320neo delivery, focus on cost cut amid muted demand
The decision comes at a time when global travel has been impacted adversely due to covid-19 related bans and lockdownsThe airline hopes to re-negotiate lease rentals, and also save costs by operating fuel efficient Airbus A320neo planes over Airbus A320ceo planes
PremiumNEW DELHI: InterGlobe Aviation Ltd, the operator of largest domestic airline IndiGo, will continue to aggressively take deliveries of cost-effective Airbus A320neo planes over the next two years. The airline plans to retire as many as 120 older Airbus A320ceo planes from its fleet during this period to reduce costs, chief executive Ronojoy Dutta said on Tuesday.
"We will replace almost all or close to all 120 Airbus A320ceo planes (with Airbus A320neo planes) depending on the revenue condition of the company," Dutta said.
The decision of the airline to continue to aggressively add capacity comes at a time when global travel has been impacted adversely due to covid-19 related bans and lockdowns. As things stand, travel demand is expected to remain muted in the coming quarters.
"Clearly, domestic (air travel) will recover fast, while international (air travel) will pick up (may be) in six months time," Dutta told analysts during a post earnings call.
On Tuesday, IndiGo reported a consolidated net loss of ₹870.81 crore for the January-March period, compared with a ₹596 crore profit in the year-ago quarter. This was driven by a surge in cost, amid tepid revenue growth, which was compounded by flight restrictions to international sectors that saw rise in covid-19 related cases like China.
That compares with over ₹1,200 crore average loss estimates compiled by Bloomberg. The airline reported a full year loss of ₹233.68 crore against a ₹157 crore profit a year ago.
Indian airlines, including IndiGo and SpiceJet, had been grounded from 25 March to 25 May during a lockdown initiated by the government to contain the spread of covid-19. Though airline operations have resumed in a much curtailed manner, the government has currently allowed companies to operate only at a third of their total fleet capacity as fear of the spread of covid-19 looms large.
“We have put on hold our capital expenditure (capex) plans and discretionary expenses," the airline’s chief financial officer Aditya Pande told analysts at the post-earnings conference call. “We have also deferred merit based salary increments. Most of our staff are on 5-25% salary cut," he added.
IndiGo’s March quarter revenue rose 4.5% to ₹8,634.62 crore from ₹8,259.69 crore a year ago. Fuel cost during the quarter rose 2.8% to ₹2,860.36 crore from ₹ 2718.28 crore on an annual basis. Total expenses rose by 30% to ₹ 9,924 crore during the period.
The airline said its total debt at the end of the March quarter stood at ₹22, 719 crore.
"In the midst of every crisis, lies great opportunity. At IndiGo we are determined to emerge from this crisis stronger and more energized than ever. We are positioning ourselves to be a stronger brand, to have a more efficient fleet and a lower cost structure. We fully intend to deliver for India, the best air transportation system in the world," chief executive Dutta said in a statement.
The airline hopes to re-negotiate lease rentals, and also save costs by operating fuel efficient Airbus A320neo planes over Airbus A320ceo planes, Dutta said adding that the costs cutting measures are expected the company to save to the tune of ₹ 3000 crore - ₹4000 crore in the next nine months.
We also expect about 50% of total supplementary rental relief (from lessors) for planes which we don't fly, CFO Pande said adding that supplementary rentals are variable paid to lessors for planes flown by airlines
At the end of the March quarter, the airline’s fleet size stood at 262 aircraft, which included 123 Airbus A320ceos, 100 A320neos, 14 A321neo and 25 ATRs, a net increase of five aircraft in the March quarter.
On Wednesday, InterGlobe Aviation’s shares rose 0.83% to ₹1039.60 on BSE, likely because the market had expected the airline to report a higher loss.
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