Bloodbath in skies: IndiGo also flies into red, reports first-ever quarterly loss

NEW DELHI: Low-cost carrier IndiGo on Wednesday announced its first-ever quarterly loss since listing three years ago, of Rs 652.1 crore this Q2, versus a profit of Rs 551.6 crore in same period last year due to high oil prices, weak rupee and fares that do not reflect the higher costs. IndiGo was till now the only consistently profitable airline in India where high costs have made survival a struggle for some financially weak carriers. In contrast, IndiGo says it has a strong balance sheet with cash reserves of over Rs 13,000 crore.

The airline’s expense on aviation turbine fuel (ATF) -- which is close to all time high prices in India currently -- rose to Rs 3,035.5 crore in the July-September, 2018 period, up 84% from Rs 1,647.3 crore in same quarter last year. Along with higher forex cost due to weak rupee, the LCC’s total cost ballooned to Rs 7,502 3 crore this Q2, up 58.2% from Rs 4,741 crore last Q2. In contrast, total income rose 18.3% to Rs 6,514.2 crore in Q2.

The airline held “higher fuel prices responsible for more than half of the profitability decline. Remainder due to currency depreciation and lower yields.” it, however, added the balance sheet remained strong “with a total cash of Rs 13,163.7 crore including free cash of Rs 4,417.5 crore.”

IndiGo co-founder and interim CEO Rahul Bhatia said: “Aviation in India is facing significant pressures from high fuel costs, rupee depreciation and intense competition, all of which have impacted our profitability this
quarter. Despite this difficult environment, IndiGo remains well positioned thanks to our low cost structure and strong balance sheet.”

CAPA Centre for Aviation India head Kapil Kaul said IndiGo’s Q2 result “indicate very tough trading conditions and inability to control market dynamics…. Indigo's strength of a very strong balance sheet and execution capability continue to give them a structural advantage but competitive intensity which is likely to sharpen further has visibly impacted.”

IndiGo's total debt on September 30, 2018, was Rs 2,641.1 crore. “The entire debt for IndiGo is aircraft related. IndiGo does not have any working capital debt,” the LCC said.

At the end of last month, IndiGo had 189 aircraft including 127 A320ceos, 50 A320neos and 12 ATRs -- increase of 20 aircraft during the quarter -- and operated a peak of 1,294 daily flights including international operations this Q2.

Bhatia added: “Along our journey to build the leading nationwide air transport network, we added 20 aircraft this quarter (Q2 FY ‘19), entered an additional 5 cities and started 35 new routes. We now fly over 100 daily departures from each of the six metros.”