A strong show in revenue growth helped IndiGo soften the blow to its bottom line from an unprecedented increase in fuel costs.
The country's largest airline, which announced its results post-market hours on Thursday, said its net loss had narrowed year-on-year to ₹1,879 crore in the second quarter from ₹2,582 crore a year ago. At the same time, excluding the dent from foreign exchange fluctuations, the airline's losses actually widened from a year earlier, to ₹723 crore from ₹103 crore.
Yet, IndiGo managed to post a strong show in its revenue, which grew 24 per cent year-on-year to ₹23,364 crore in the second quarter, from ₹18,555 crore a year ago.
"I have been in the industry for 47 years, and I have never seen anything like this. It's not just the high rate of crude, but the premium on fuel that airlines have to pay in India. If these premiums were historically around 20-22 per cent, it's 65 percent this year. We are looking at a period of elevated fuel costs," Chief Executive Officer Willie Walsh said during a media interaction after the results announcement.
The 'premium' Walsh was talking about relates to the way aviation turbine fuel is priced in India. Apart from being based on the actual cost of producing fuel at refineries in India, the ATF in India is also linked to international benchmarks and is vulnerable to currency fluctuations. More than half of the fuel sourced by IndiGo is dollar-denominated.
“The seasonally soft September quarter saw exceptionally elevated fuel costs and continued geopolitical turmoil. We responded with prudent capacity reduction and yield management, supporting strong revenue performance but only partially offsetting the higher costs. Despite these actions, the quarter resulted in a net loss of around 19 billion rupees. We remain focused on managing the near-term challenges while continuing to invest for the future. India’s long-term aviation opportunity remains compelling, and our priorities remain clear: safe and reliable operations, rigorous cost discipline, and disciplined growth that creates sustainable value,” Walsh said.
This was the first time the industry veteran was addressing a quarterly earnings performance after taking over at IndiGo in August.
The airline's fuel costs jumped by 67.2 per cent in the quarter. To control costs, it reduced capacity by 1 per cent. Its passenger traffic for the quarter stood at 27.5 million, a decline of 4.7 per cent. Importantly, the airline's debt saw a rise of 16.7 per cent to ₹87,303 crore at the end of the second quarter.
Earlier this month, the airline had increased fuel surcharges across its routes in the domestic and international markets. Yet, Walsh noted, this has helped the airline recover only a part of its additional expense on ATF. At the same time, he said, "IndiGo is fortunate to have an efficient cost base. We don't see the need for any significant cost measure right now." He further indicated that the airline may continue to keep a close watch on capacity, which it had reduced in the second quarter, for the winter schedule too.
Talking about the challenges from the war in the Middle East, Walsh said the airline is keeping tabs on events in Saudi Arabia, where it had paused operations. Though the airline had scaled back its daily flights to the Middle East market to 140 flights a day, this was now down to 100 because of the situation in Saudi Arabia.
IndiGo's stock closed 0.32 per cent on Thursday at ₹4,675 a share.
