IndiGo, India’s largest airline by fleet and domestic market share, will declare its earnings for the second quarter of FY25 and H1-FY25 today. This comes weeks ahead of Vistara merging into Air India and days after AIX Connect (erstwhile AirAsia India) merged into Air India Express. Hitherto has IndiGo seen such a competition, since its inception in 2006.
The results will determine whether the seven-quarter unbeaten run of profitability continues to the eighth quarter or takes a break in what is traditionally a weaker quarter. The results will also include the compensation from Pratt & Whitney, which the airline has never made public, citing contractual obligations.
At 2.44 crore domestic passengers, the quarter saw a modest growth of 5% in passenger numbers Q2-FY24. However, the numbers are marginally down sequentially over Q1-FY25, though the airline has gained market share now, thanks largely to Air India Express not growing rapidly and SpiceJet shrinking by half.
In the preceding seven quarters, the airline has recorded a profit of ₹12,790 crores with Q2-FY25 recording Rs189 crore profit. Its international operations have been steady in terms of growth with increase in frequency showing increase in both capacity as well as passenger numbers.
The quarter saw the airline be prudent with capacity addition, but ended up with a higher market share at 62.5% as compared to 61% in the preceding quarter and 60.7% in the same quarter last year. Not only is the airline growing, but it is also taking a larger portion of the growing market.
The airline has expanded in a measured manner this quarter and will benefit from the oil prices, which are cooling off from a high, and the rupee sliding only a quarter of a percentage to dollar. With leasing costs being dollar-denominated, the costs would have been under control. The airline has been holding on to its yields at the cost of its load factors, which are consistently lower than even full-service carriers like Air India and Vistara.
This quarter had a relatively lower guidance in place in terms of capacity, which has been achieved. How much of an impact that has had on the cost side, and how have the maintenance costs changed, especially when it has more A320ceo - the older generation aircraft-- will be keenly watched.
The airline has repeatedly refused to divulge the details of the compensation it is receiving from Pratt & Whitney for the groundings. However, it does classify it as income, and over time, the income will balloon up and become difficult to compare on the other side of groundings. It has always remained unclear if it is getting compensated in cash, kind, or both.
Lastly, the things to watch out for will be guidance on capacity into this quarter, which is traditionally the best, though market pricing and capacity indicate demand being softer than before. Additionally, the count of destinations was announced, but will the management declare these destinations this time around?
Can the airline clock profit, and if it does, will it be wafer-thin? It is unlikely to cross the revenue numbers of last quarter. With pressure from both the demand and cost side, a breakeven with a three-digit profit will be an achievement, and that may well be powered by the compensation, without any way of knowing exactly how much.
The management commentary will revolve around SpiceJet's recapitalisation, Vistara's merger with Air India, and IndiGo’s foray into a dual-class offering, which starts about 20 days from now with the impending delivery of the first aircraft. The airline has yet to open reservations for flights beyond the three daily flights each way it has on offer right now between Mumbai and Delhi.
It will all boil down to continuing the unbeaten run for the eighth straight quarter or not. The results are only hours away.
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