IndiGo second quarter results | Traffic and revenue are increasing, but costs are also increasing

2021-11-22 09:33:51 By : Mr. Sebastian GE

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India’s largest domestic airline IndiGo lost 1,435.6 crore rupees in the September quarter, which is equivalent to a daily loss of 15.77 crore rupees. This is less than half of the first quarter when the country’s COVID-19 case surge was at its worst.

In the past few quarters, the airline has not forecast future load or capacity. However, when it announced its September quarterly data on October 28, the airline stated that its estimated load factor for the month might be about 76%.

Revenue has improved significantly, traffic has rebounded, and freight business revenue has also increased.

Surprisingly, the booking revenue in October is the same as the revenue in January 2020 (before COVID). Surprisingly and interestingly, its capacity is 20% lower than in January 2020.

The increased revenue is a combination of fare caps, which ensures that average fares remain high because they cannot fall below a certain level at the last minute, pent-up demand due to limited international flights, and will cause more changes when new destinations open. High pricing.

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The airline is considering a two-pronged strategy in terms of cost and revenue to improve its financial situation.

In addition to hoping to obtain permits to fly to Singapore, Malaysia and Saudi Arabia-whether under the new bubble agreement or other arrangements proposed by the government-it also hopes to invest more capacity in the market.

As the capacity ceiling disappears, increasing capacity and activating more flights will help reduce the cost of each seat.

The airline said it is seeing a recovery in various market segments. Business travel has returned to 50% of pre-COVID levels, and MICE is growing faster than other areas.

Before COVID, 24% of the airline's overall business was contracted corporate business. The booking curve has also returned to its pre-COVID levels, helping to obtain cash from future sales.

With the return of business travel, the airline will consider adding more flights in the subway sector, and continue to expand the business of the non-metro sector, while selectively paying attention to the opening hours and locations of international opportunities.

Fuel prices have risen from US$65 per barrel in January 2020 to US$85 per barrel now. Fuel expenses accounted for 27% of airlines’ total costs in the September quarter. Since many costs are denominated in U.S. dollars, further declines in the rupee will further affect airlines.

IndiGo is exploring whether certain fees denominated in U.S. dollars can be outsourced to India.

The government has been trying to start leases from GIFT City, and also looking for incentives for maintenance repair and overhaul (MRO) and engine workshops. All of these will have a positive impact, but this is a long-term strategy.

The airline introduced 15 aircraft in 12 weeks-8 A320neo, 3 A321neo, and 4 ATR 72-600. It added 2 aircraft in the quarter because it returned 13 A320ceo aircraft.

More A320ceo are parked in various MROs around the world, and the airline has been operating efficiently to help reduce costs.

As fuel costs rise, switching to all NEO fleets will help airlines improve their competitiveness.

The airline has 14 aircraft. It plans to own a few more aircraft, but now its first goal is to repair its balance sheet. Before planning to invest in the airframe again, the airline will invest to ensure that it is financially sound.

The management also answered questions about the game. When speculating on Tata Group's plans for Air India, the management explained how to distinguish itself from Tata, because they are all competing in different markets, and IndiGo does not consider wide-body aircraft now.

The management also opened up to Akasa and ultra-low-cost Carrie models, and strongly advertised that the airline would match any competitive measures permitted by regulations, including baggage charges.

IndiGo's performance was better year-on-year and month-on-month. However, its supplementary rent and aircraft repairs and maintenance have increased significantly. This may be due to the re-delivery cost and maintenance of its old A320ceo to visit the engine workshop. As the airline transitions to all NEO fleets in the Airbus series, this situation may decline further.

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