Indigo posts ₹1,879 crore loss, hints at rise in airfares

InterGlobe Aviation, the parent company of the country's largest airline IndiGo, has posted a consolidated net loss of ₹1,879 crore for the July-September quarter. According to a report by Hindustan Times, the airline had to bear this loss due to high jet fuel prices and the depreciation of the rupee. However, this loss is lower than the ₹2,582 crore loss recorded in the same quarter a year ago, reflecting a 27.2% decrease. According to a report by TV9 Gujarati, this loss also remained lower than Bloomberg's estimate of ₹2,063 crore.

Airline CEO Willie Walsh stated that rising ticket prices are inevitable. He hinted that airfares may need to be increased further to cover the rising fuel bills. According to Walsh, despite increasing fares and adding fuel surcharges, the airline has been able to recover only 60% of the increase in fuel costs. The airline is considering raising fares while making efforts to limit its impact on passengers.

The company's revenue from operations has increased significantly. Operational revenue rose by 25.9% year-on-year to ₹23,364 crore, compared to ₹18,555 crore last year. This figure is also higher than Bloomberg's estimate of ₹22,988 crore. Earnings Before Interest, Tax, Depreciation, and Amortization (EBITDA) saw a massive surge of 229.1%, rising to ₹1,907 crore, while previously it was ₹580 crore. The EBITDA margin also increased from 3.1% to 8.2%.

However, this increase in revenue has not been sufficient to cope with the large increase in expenses. The company's total expenses increased by 19% year-on-year to ₹26,188 crore. Specifically, fuel costs rose by 67.2% to reach nearly ₹9,967 crore. Willie Walsh attributed this increase to the unusual difference in the price of refined fuel compared to crude oil, known as the 'crack spread'. He stated that during his 47 years of experience, he had never seen anything like this. Historically, the crack spread averaged 21-22%, but this year it has averaged around 65%.

Increasing foreign exchange pressure and rupee depreciation have also added to the burden on the airline. However, the loss from foreign exchange, which was ₹2,892 crore in the same quarter last year, decreased to ₹1,333 crore. If the foreign exchange impact is set aside, IndiGo incurred a loss of ₹724 crore, whereas a year ago in the same period the company had posted a profit of ₹104 crore. Due to rising oil prices driven by the Middle East conflict, there has been a major increase in Aviation Turbine Fuel (ATF) costs.

A slight decline was observed in passenger numbers and capacity. During this quarter, IndiGo served 2.75 crore (27.5 million) passengers, which is 4.7% lower compared to last year. The airline's capacity (ASK) decreased by 1% and stood at 40.8 billion. The passenger load factor also declined from 82.5% to 80.3%. Passenger traffic (RPK) decreased by 3.7% to 32.8 billion. Nonetheless, passenger yield registered an increase of 34.3%, rising to ₹6.30, which provided support to the revenue.

Willie Walsh stated that the month of September remained seasonally weak in this quarter, but demand is expected to rise in the upcoming quarter due to the festive season. IndiGo expects its capacity in the December quarter to grow in single digits, i.e., less than 10%. Walsh clarified that the company will review its network plan and capacity to mitigate the impact of fuel costs. He ruled out any large-scale cost-cutting plans, as the company currently has the right cost structure and liquidity.

Talking about the financial position, at the end of September, the total debt on the airline stood at ₹87,303 crore, which includes ₹55,159 crore of capitalized operating lease liabilities related to aircraft leases. On the other hand, the company has cash reserves of ₹52,685 crore available. Despite financial pressure, IndiGo remains firm on its international expansion goals. The company plans to induct Airbus A350 wide-body aircraft into its fleet in 2028, and Walsh assured that the company is not going to delay any of its long-term plans.