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IndiGo on Wednesday posted its highest ever quarterly consolidated net profit at Rs 3,090.6 crore for the first quarter of 2023-24 (FY24), on the back of high load factors, lower fuel costs, and better foreign exchange rates.
In Q1 of last financial year, India’s largest airline incurred a consolidated net loss of Rs 1,064.2 crore. It had previously recorded its highest ever quarterly net profit in the third quarter of last financial year at Rs 1,422.6 crore. In Q4FY23, the profit was Rs 919.20 crore.
The airline is planning to use a portion of its fresh cash balance — which stood at Rs 15,691 crore at the end of Q1FY24 — to acquire a few aircraft and related assets, such as engines, said its Chief Financial Officer (CFO) Gaurav Negi during a call with analysts. The airline used to own a few planes before Covid-19, but these assets were offloaded during the pandemic-related downturn. Now, it is allocating capital again to own a certain number of planes.
“Further, subject to regulatory approvals, we are also planning to launch our venture capital arm to invest in early-stage companies operating in aviation and consumer-focused allied sectors, such as travel, lifestyle, hospitality, and transportation. Given our large consumer base and growth plans, we believe that these investments will help us add value to the airline,” Negi noted.
“We are going to establish an LLP. We will be investing Rs 7 crore initially in this arm. There is more to this. Internal discussions are happening,” Negi said.
IndiGo’s total revenue increased by 32 per cent year-on-year (YoY) but its total cost decreased by 0.1 per cent at the same time. The fuel cost for the airline came down by 12.7 per cent YoY. On the other hand, its load factor (occupancy rate) increased by 9 per cent YoY in the June quarter.
The better foreign exchange rate also assisted the airline. “The rupee closed slightly stronger at the quarter-end, leading to a forex gain of about Rs 120 crore,” Negi noted.
Last month, Pratt & Whitney (PW) decided to inspect around 1,200 engines for certain defects. About half of IndiGo’s 323 aircraft fleet is powered by PW engines. The CFO said the airline is working closely with the engine maker to assess and minimise any impact on its fleet.
“We understand that this activity (inspection) will be undertaken in a phased manner, impacting a handful (in single digits) of our engines in the first phase. We are working with the OEMs (original equipment manufacturers) to assess and minimise any impact on our fleet,” he noted.
The airline’s Chief Executive Officer (CEO) Pieter Elbers said the first phase will impact a single-digit number of engines, so it doesn’t dramatically change anything for the airline. “It does not affect our capacity guidance. We are in close contact with PW on what will be the impact on the stages thereafter. There are still a lot of questions on our side about the precise duration and phases when the inspections will take place. We are awaiting further information from PW,” Elbers noted.
Even before the current inspection, IndiGo’s PW-powered planes have been facing issues. “We have an existing situation with the number of aircraft that have been impacted by the supply chain challenges,” Elbers noted, adding that the number of grounded planes is in “around 40s” now.
As the airline continues to grow, it plans to develop “people, processes, and technologies” in the next phase of its growth and so it is investing in digital infrastructure, human capital, and a loyalty programme, Negi mentioned.
Elbers said that before the pandemic, the airline was operating flights to 80 destinations and on 350 routes. The carrier is now operating services to 110 destinations and on about 500 routes.
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