InterGlobe Aviation, the parent company of low-cost carrier IndiGo, posted a 167.9% year-on-year jump in its net profit to Rs 495.97 crore for the December quarter, boosted by a 25.5% growth in operating revenue at Rs 9,931.68 crore. Revenues rose at a faster pace than capacity growth, the management said. The airline revised its capacity guidance for financial year 2021 downwards 20% from 25% earlier due to slowdown in aircraft addition.
Capacity for the quarter (measured in available seat km) rose 19.3% Y-o-Y to 2,580 crore. The management expects capacity increase of 20% during the fourth quarter and 23% for the full FY20. "Aircraft utilisation has been held back lately due to pilots in training as well as the numerous engine changes. But come June of 2020, we will be in a position to increase aircraft utilisation," Ronojoy Dutta, CEO, InterGlobe Aviation, told analysts on a conference call.
Operating revenues were boosted by a 29% growth in ancillary revenues, against a capacity growth of 19%. Cargo uplift grew 46% Y-o-Y in the December quarter, taking its domestic cargo market share to above 40%, compared to 27% a year ago. The management said other ancillary revenues also grew at a faster pace than capacity. Yield for the quarter was up 1.2% Y-o-Y to `3.88, while per passenger revenue grew 5.6% Y-o-Y to `3.91/km. December was a particularly strong month in terms of revenues, Dutta said. "However, as we move to the seasonally-weak fourth quarter, Y-o-Y unit revenue will become more challenging because we will be comparing ourselves against a base period when Jet Airways capacity was beginning to decline."
The operating income, which is earnings before interest, tax, depreciation, amortisation and rentals (EBITDAR), rose 17.2% Y-o-Y to Rs 1,960.7 crore during the December quarter, but the EBITDAR margin fell 140 basis points to 19.7%. The airline continued to face cost headwinds, driven by maintenance costs of old Airbus CEO aircraft and pilot training expenses. The average age of the airline’s old Airbus CEO fleet is around six years, Dutta said.
Expenses rose 21.5% Y-o-Y to Rs 9,773.63 crore, driven by a 55% increase in supplementary rental, aircraft and maintenance costs to Rs 1,633.13 crore. Cost per passenger (excluding fuel costs) increased 17.5% to `2.40/km, driven by mark-to-market foreign exchange losses on operating leases, higher employee and maintenance cost. Foreign exchange losses were on account of the depreciating rupee, which fell to `71.30 against the US dollar during the quarter. "As a result, we had a Rs 1.3 billion (Rs 130 crore) of mark-to-market loss on our capital operating leases," said CFO Aditya Pande.
The management expects a weak performance in the fourth quarter due to delivery delays and lower aircraft utilisation. "Our fourth quarter is off to a weak start… by June we really ramp up our aircraft utilisation. So, aircraft utilisation is weak in the fourth quarter, weakish in March-April and ramps up towards the end (in June)… We have had some delivery delays as well from Airbus. So, it is a combination of those two factors," Dutta said.
The airline’s performance in the domestic metro market worsened due to competition, but was made up for by the performance on international routes. "The overall strength in metro-to-metro market is weak because of the new competition we are facing in these markets. Fortunately, international is a bright spot in our system as both capacity and margins continue to expand simultaneously," Dutta said.