Indigo narrowed its losses by 66% on year to ₹1,064 crore in June quarter as against ₹3,174 crore last year.- Jet fuel prices rose by a massive 95.5% during the quarter and the airline also had to incur foreign currency losses.
- Indigo says that if foreign currency loss of ₹1,424 is excluded, the company would make net profit of ₹360 crore.
But this has only allowed them to narrow their losses to ₹1,064 crore in June quarter as against ₹3,174 crore last year. This is in spite of a four four-fold rise in revenue from operations to ₹12,855 crore as its capacity swelled by 145%.
Along with economic activity coming back, it also had to deal with jet fuel prices rising by a massive 95.5% during the quarter, foreign currency losses due to a volatile currency and more.
Indigo says that if foreign currency loss of ₹1,424 is excluded, the company would make net profit of ₹360 crore.
“We reported the highest ever revenue generated by the company and thereby produced profits at an operational level. However, cost pressures on fuel and foreign exchange prevented us from translating this strong revenue performance into net profitability. While our financial performance in the second quarter will be challenged by weak seasonality, the long-term revenue trend remains strong,” said CEO, Ronojoy Dutta.
Indigo could book profits in December quarter
The next quarter won’t get any better either, as the seasonal effect of the summer quarter will go away. Revenue is expected to fall next quarter as schools open, monsoons, and the month of shrad when fewer people travel.
“All these things tend to hold back the second quarter revenues. And it's been historically and not a one year phenomenon,” said Dutta in an analyst call.
Dutta however hopes that if fuel and foreign exchange pressures ease, they would deliver profits in the third quarter of the fiscal year.
“If fuel and foreign exchange behave just a little bit I think we could have a focused storm of profitability in the third quarter,” he said.
‘Giving up trains for us’
Indigo resumed scheduled international operations and are now roughly operating at pre covid international levels. The capacity deployed in June quarter was around 35% higher than previous quarter and around 7% higher than pre covid capacity.
He added that corporate travel has been strong. “Also, people are traveling like crazy to tourist destinations. So markets like Srinagar, Leh, Dehradun, Goa are all performing very well.
“We are getting substitution from rail into airline in all these short fall markets, whether it is Delhi-Lucknow, Delhi-Dehradun, Kolkata-Devgad, people are giving up trains and coming to us. This is a positive sign,” he said.
Even as the love for travel increases, most airlines will have to battle new competition like the launch of Rakesh Jhunjhunwala backed
“The fact that competition is increasing and addition in flights but also its quite small, the capacity is limited at this point. We don’t see too much impact from the competition, if anything we see a healthy industry environment as far prices are concerned,” said Dutta.
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