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IndiGo Q2 Earnings: Here are the top 10 key takeaways

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The management held a post-earnings conference call and shed light on a lot of issues except the dispute between the two promoters, Rahul Bhatia and Rakesh Gangwal.

IndiGo Q2 Earnings: Here are the top 10 key takeaways
IndiGo on Thursday posted a net loss of Rs 1,062 crore for the September quarter. This was a weaker July-September quarter as the airline registered a net loss of Rs 652 crore in the same period a year ago. The management held a post-earnings conference call and shed light on a lot of issues except the dispute between the two promoters, Rahul Bhatia and Rakesh Gangwal. Here are the top things to know:
  • Mark-to-market losses on capitalised operating leases of Rs 428 crore and higher maintenance cost of Rs 319 crore significantly impacted the profitability of the airline.
  • The airline has increased its market share in domestic cargo in the September quarter to 39 percent from 28 percent year ago. The airline is now focusing on inbound cargo market from South East Asia and Middle East.
  • The airline is seeing stronger performance in markets where Jet Airways was not present earlier. However, the airline is seeing decline in yields in the metro to metro market where low-cost capacity has replaced the capacity of Jet Airways. On the international front, China is performing better than expected for IndiGo.
  • IndiGo has warned of sustained weakness in the market after “unusual” fares in the strong month of October. As revenue during festive season was somewhat subdued, the airline is expecting a flattish year-on-year unit revenue growth for December quarter.
  • IndiGo has cut its capacity growth target for the current financial year to 25 percent from 30 percent earlier due to delay in aircraft delivery from Airbus. The airline will no longer be adding aircraft at the rate of six planes per month.
  • As of September 30, IndiGo had a total cash balance of Rs 18,736 crore comprising of Rs 8,706 crore of free cash and Rs 10,030 crore of restricted cash. Post servicing of debt and lease obligations, IndiGo generated Rs 3,340 crore through its operating activities for the half year ended September 2019. The total debt, including the capitalised lease liability, for IndiGo as on Sep 30 was Rs 19,842 crore.
  • Employee cost for the airline in the September quarter was 56 percent higher on year at Rs 1,206 crore on account of 600 pilots being on training and salary hikes. However, the company said that it expects employee cost to go down from the second half of the year as pilots complete training.
  • IndiGo said that going forward, the market is softening, maintenance cost for A320ceos will remain elevated for the next two quarters, aircraft utilisation rate is expected to improve a little and uncertainty continues on fuel cost. Aircraft utilisation rate has been lower as some aircraft have been on reserve in view of Jet Airways slot situation.
  • The airline also expects to get ETOPS (extended range approval) for its Pratt & Whitney-powered A320neo family aircraft next year. Currently, this allows A320neos to operate a route only when the nearest alternative airport is 60 minutes away. Once this permission is received, the aircraft can operate a route with the maximum time limit for alternative airport at 120 minutes.
  • The airline’s old A320ceos will start retiring from 2021 and by 2022, the airline expects to retire most of these A320ceos. Till 2022, the airline expects to witness the impact of high maintenance cost for these older A320ceos.
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