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Things improving rapidly; profitability may not be too far off: IndiGo CEO

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Things improving rapidly; profitability may not be too far off: IndiGo CEO

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"Now we would like to repair that balancesheet, So, we are still burning cash but we have a quite glimpse that profitability may not be too far off," said Ronojoy Dutta, CEO, InterGlobe Aviation (IndiGo) in an interview with CNBC-TV18.

“Things are improving and improving rapidly,” said Ronojoy Dutta, CEO, InterGlobe Aviation (IndiGo), in an interview with CNBC-TV18.

“The forward booking, the revenue numbers look very strong,” he added.
Company’s balancesheet took a battering over the COVID period.
“Now we would like to repair that balancesheet, So, we are still burning cash but we have a quite glimpse that profitability may not be too far off, it is still not close enough but we see the light at the end of the tunnel. So we would like to get back to profitability and positive cashflow,” he mentioned.
Domestic air traffic continues to improve, rising 67 percent year-on-year (YoY) in October to 88 lakh passengers.
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“if I were to look at domestic, I would say COVID is kind of over, we are coming out of it but international is still a bit of a challenge, we had about 65 percent revenue booking compared to pre-COVID. Good news is that the governments are gradually doing this bubble arrangement country after country. We are now hopeful that the next target countries going to be Saudi Arabia, Nepal and Thailand. If those markets also open up, that will be great,” he explained.
He sees significant pick up in corporate travel.
“It went down pretty sharply during COVID. Then pre-Diwali we saw some improvement. There has been a significant pick up in corporate travel,” he stated.
According to him, aviation is a very highly taxed industry when it comes to indirect taxes.
“Our indirect taxes are almost 21 percent of our revenues and that is a very high number,” he said.
The industry has been talking to the government about trying to reduce this and there has been small progress on this front.
“A few states, Uttarakhand, Kashmir, Andaman have reduced value added tax (VAT) down to 1 percent but the biggest states like Delhi, Mumbai, Karnataka - where all the volume is – we have not seen much reduction. Therefore cost continues to be a problem,” he explained.
He feels the government should help the industry reducing indirect taxes.
“It is going to be a hard grind for us even when things get back to normal if we are taxed at this high rate,” he said.
IndiGo has much more fuel efficient engine.
“We have much more fuel efficient engines and A320neos are now almost 50 percent of our fleet, as that happens more and more, our fuel consumption goes down and we are happy with that reduction of cost,” he said.
The company is seeing higher productivity in terms of employees. “We are gradually unwinding the ‘leave without pay’ and so forth. By December will no longer have any ‘leave without pay’. So employee costs are still under control mostly because of higher productivity but gradually we will have to roll back the salary cuts,” he stated.
Air India divestment is good for the country, good for the aviation and good for IndiGo as well, he noted.
“Having a healthy competitor based on underlying economy is a good thing. Therefore we are very happy.”
Akasa Air will be flying smack into Go First, SpiceJet and IndiGo in the low-cost carrier (LCC) space. So IndiGo will have a challenge there, he said.
The company wanted to get everything ready and in place just in case there was a third wave of COVID-19.
“Fortunately that has not happened, so qualified institutional placement (QIP) is sitting on a shelf. It was always meant as a disaster insurance,” he shared.
For the full interview, watch the accompanying video.
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