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    IndiGo Q4 FY20 earnings: Here are 10 takeaways

    IndiGo Q4 FY20 earnings: Here are 10 takeaways

    IndiGo Q4 FY20 earnings: Here are 10 takeaways
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    By Anu Sharma   IST (Updated)

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    India's largest airline IndiGo on Tuesday posted a loss of Rs 871 crore in January-March against a profit of Rs 596 crore in the year-ago period.

    India's largest airline IndiGo on Tuesday posted a loss of Rs 871 crore in January-March against a profit of Rs 596 crore in the year-ago period.
    Total income of InterGlobe Aviation Ltd, which operates IndiGo, rose 4.5 percent year-on-year (YoY) to Rs 8,634.6 crore in the last quarter of FY20, while its expenses climbed 30 percent YoY to Rs 9,924.4 crore.
    The earnings before interest, tax, depreciation, amortisation and rent margin for the airline during the period between January-March stood at 1 percent as compared to 27.9 percent a year ago. Its yield rose 1 percent YoY to Rs 3.74 a km from Rs 3.70 a km earlier.
    Here are the 10 key takeaways from IndiGo's earnings
    Headwinds
    IndiGo saw significant cost headwinds, particularly, due to rupee depreciation of nearly 5.7 percent during the quarter. As a result, the airline witnessed nearly Rs 1010 crore of foreign exchange loss, primarily driven by Mark to market loss on capitalised operating leases.
    Fleet
    The airline has added five aircraft since December 31 and the total fleet now stands at 262 planes. It has not given any guidance on capacity and revenue front as of now. As of March 31, IndiGo had a total cash balance of Rs 20,376.9 crore, including Rs 8,928.1 crore of free cash and Rs 11,448.8 crore of restricted cash.
    A320neos
    The airline will prefer flying Airbus A320neos over A320ceos, going forward. As a substantial part of fleet will be unused for some time, the airline plans to utilise more fuel-efficient A320neos to save costs and simultaneously it will also retire the 120 old A320ceos as early as possible within a period of two years. It expects to replace either the entire A320ceo fleet or at least most of it with neos. Induction of A320neos will take place in Q1 and Q2 of the current financial year or until September 2020.
    Middle seat
    The airline said that it will keep middle seat empty wherever possible and will provide extra protective wear such as a gown to the passenger if the middle seat is occupied. The airline's Chief Executive Officer Rono Dutta reiterated that there was no evidence yet of transmission of COVID-19 in an aircraft and those positive cases which were discovered post flights had the virus before they got on to that airplane.
    Right-sizing
    The airline will not pay dividend this year and has put massive cost-cutting measures in place to successfully survive the COVID-19 pandemic. It has planned for Rs 3,000-Rs 4,000 crore additional funding over a period of nine months via not paying dividend, freezing of supplementary rentals, arrangements with suppliers, and modified delivery schedule.
    Neither buyer nor seller
    It does not plan to buy any airline or sell its airline as of right now. Currently, the airline's planning horizon is of three months. The airline wants to "right-size" itself and has put on hold all discretionary expenses and have deferred certain capex projects as well.
    Fund raise
    The airline is also looking to raise finance against a number of unencumbered assets of IndiGo which could be a source of additional liquidity for the airline. Currently operating with 20 percent capacity, the airline will reduce its unit cost even further, making fleet more efficient and ensuring that its capacity is right sized to the market. It has decided to shift focus from profitability and growth to managing cash and liquidity.
    Employees
    In line with its plan to reduce costs further, the airline plans to save 25 percent on employee expenses. It is important to note that IndiGo has already announced salary cuts in the range of 5-25 percent across organisation except for certain employees with low pay grades. It has also deferred merit-based salary increments and has announced leave without pay for the months of May, June and July. Going forward, it will review these numbers constantly and "adjust" them to the revenue environment.
    International routes
    The airline continues to be bullish about its international segment, which did better than domestic for IndiGo during 2019 and it is "anxious" to restart international flights. It is optimistic that once travel restrictions are removed, international segment will once again be a strong performer for IndiGo. However, the airline is aware that international travel demand will take longer to pick up as compared to domestic.
    Cargo
    The airline has converted 10 Passenger aircraft into freighters, which can carry up to 20 tonnes of cargo. Cargo has turned out to be one of the airline's "few bright spots" for IndiGo and it has operated cargo flights to Middle East and China. Before the airline was limited to carrying cargo in the belly space only which can carry 6-9 tn of cargo.
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