Q1 Results: IndiGo’s Profit Misses Estimates As Forex Losses, Fuel Costs Soar

Here’s why IndiGo’s profit was nearly wiped out in April-June.

An IndiGo aircraft prepares to land at Chhatrapati Shivaji International Airport in Mumbai, India (Photographer: Dhiraj Singh/Bloomberg)  
An IndiGo aircraft prepares to land at Chhatrapati Shivaji International Airport in Mumbai, India (Photographer: Dhiraj Singh/Bloomberg)  

InterGlobe Aviation Ltd.’s profit was nearly wiped out in the quarter ended June because of rising fuel prices, competitive fares and foreign exchange loss.

Net profit in the April-June period plunged 97 percent from the year-ago quarter to Rs 28 crore, according to an exchange filing by the parent of low-cost carrier IndiGo. That compares with the Rs 514-crore consensus estimate of analysts tracked by Bloomberg.

Shares of the company fell as much as 10 percent in early trade today to hit a 16-month low of Rs 904.

  • Revenue rose 13 percent year-on-year to Rs 6,512 crore.
  • Earnings before interest, taxes, depreciation, amortisation and rentals fell 47 percent to Rs 1,031 crore.
  • Margin more than halved to 15.8 percent from 33.9 percent earlier.

Rising global fuel prices and foreign exchange losses hurt IndiGo, the country’s largest airline, in the last two quarters even as its passenger growth surpassed the industry’s average in June.

While the aviation turbine fuel prices have gone up 27.4 percent over the last year, the company suffered a loss of Rs 246 crore due to currency fluctuations. That hurt its margin significantly at a time its management is undergoing a churn. Yield, or the airline’s earnings per every kilometre flown, fell 5.4 percent to Rs 3.62.

IndiGo Sees an End to Engine Woes as Groundings Weigh on Margins

Aditya Ghosh, who was the company’s president for the last 10 years and was credited with steering the no-frills airline to market leadership, announced his resignation during the quarter. The company intends to replace him with Gregory Taylor, who has been appointed senior adviser and will be considered for the top job after regulatory clearance.

IndiGo’s Chief Commercial Officer Sanjay Kumar, too, quit in June and was replaced by William Boulter, the chief strategy officer.

IndiGo continues to face technical glitches in its engines manufactured by Pratt & Whitney amid a shift in its operating model from a single-fleet to a multi-fleet strategy to expand in India and overseas.

Yet, the airline continued to grow its hold over the Indian skies. With a 41 percent market share, IndiGo’s passenger traffic grew at 22 percent in June compared with the industry’s 18.4 percent. It’s cancellation rate was also among the lowest despite being beset by engine troubles. During the quarter, its capacity increased 18.4 percent after it added 10 aircraft.

“While we faced headwinds during the quarter, we remain focused on executing our long-term plan,” Co-Founder and interim Chief Executive Officer Rahul Bhatia said in a statement. “We added capacity into new routes and destinations domestically and also continued to connect international destinations to various cities in India.”

The InterGlobe Aviation’s stock closed 0.4 percent lower at Rs 1,005 apiece, ahead of the earnings announcement.