The company reported a loss of Rs 651.2 crore in the second quarter, hurt by high costs and low fares
Taking the fight to the opposition camp, IndiGo co-founder Rahul Bhatia on October 24 blamed the airline's competitors for the low fares that are squeezing dry margins.
"We are not leading the charge in low fares. There are players in the industry who are hurting and need to raise cash. And we have no choice but to match them," Bhatia, who is also the interim CEO of the company, told analysts over a conference call.
Much of the call was about low fares, as InterGlobe Aviation, which operates IndiGo, reported a net loss of Rs 651.2 crore for the September quarter, a sharp fall from Rs 551.5 crore reported during the same period of last year.
The loss could have been higher if not for other income of Rs 328 crore, over 50 percent higher than in the same quarter a year earlier.
Its revenues rose to Rs 6,185.31 crore, up 17 percent from Rs 5,290.9 crore reported during the corresponding quarter of last year.
The airline reported a fall of 86 percent in its earnings before interest, taxes, depreciation, amortization and rent (EBITDAR) at Rs 220.4 crore against Rs 1,581.1 crore year on year.
IndiGo blamed the loss on higher fuel prices "responsible for more than half of the profitability decline; remainder due to currency depreciation and lower yields."
The high costs could have been compensated by the strong growth in the sector, among the fastest in the global aviation industry. The Directorate General of Civil Aviation in its monthly report today said passenger traffic has grown by 20.94 percent in the January-September period, as compared to the last year.
But the intense competition has seen fares staying low. Responding to an analyst who questioned why the airline, as the largest in the industry, can't take a lead in raising fares, IndiGo's Chief Commercial Officer Willy Boulter said the airline had, in fact, raised fares in May, adding a fuel surcharge.
"But the price hike was not matched by competition and as a result, we had to withdraw the surcharge. We are not interested in low prices," added Boulter.
Ironically, the airline today launched a promotional offer, selling domestic tickets from Rs 899 and international from Rs 3,399. But the management clarified in the call that the sale was for post-Diwali travel, a short lean period before the year-end peak.
Capacity addition
The airline management faced a barrage of questions on its faster-than-industry rate in adding capacity, which also prevents airlines from increasing fares.
IndiGo this quarter added 20 aircraft, taking its fleet to 189 aircraft including 127 A320ceos, 50 A320neos and 12 ATRs.
The company added that the third quarter fiscal 2019 year-over-year capacity increase in ASKs (available seat kilometers) is expected to be 35 percent. "Full year fiscal 2019 year over year capacity increase in ASKs is expected to be 30 percent," it said in a presentation.
The rate is much higher than the industry average.
But the management said the delivery of aircraft by Airbus was ramped up in the second quarter after an initial delay, leading to high capacity addition.
