India’s largest passenger airline just posted its first ever quarterly loss since going public — and its results reflect the larger woes of the country’s aviation sector



  • Indigo reported a net loss of ₹6.5 billion for the quarter ended September 2018 — its first quarterly loss since its initial public offering in late 2015.
  • The airline attributed its weak results to the rising costs of fuel, the depreciation of the rupee and an inability to increase fares owing to intense competition.
  • Indigo is looking to tap into more international routes, especially in Southeast Asia, and reduce fuel costs by operating lighter aircrafts n order to offset cost pressures at home.
Indigo, India’s largest budget airline, just reported a net loss of ₹6.5 billion for the quarter ended September 2018 — its first quarterly loss since its initial public offering in late 2015. This came despite a 17% rise in revenue from operations to ₹61.9 billion as the airline added 35 new routes and recorded an increase in passenger traffic.

Indigo laid the blame for its loss squarely on external issues ; the rising costs of fuel, the depreciation of the rupee and an inability to increase fares owing to intense competition. In fact, the airline said that high fuel costs were responsible for over half of the fall in its profitability.

The fact that Indigo — which boasts a 42% market share and is routinely touted for its efficiency and low costs — is struggling is indicative of a sector-wide malaise, and does not bode well for the results of other airlines.

India’s carriers have not had an easy year. Fuel costs, which are denominated in dollars and comprise nearly 40% of the operating costs of most airlines, have been accelerating amid a global supply crunch and the rupee’s freefall.

Meanwhile, airlines have been unable to increase fares by a corresponding amount for fear of driving customers away. In a bid to keep costs in control, most airlines have stalled plans to buy new aircrafts and resorted to leasing them instead. The sector’s major casualties are Jet Airways, which is selling a stake in its loyalty programme to stay afloat, and Air India, which is pinning its hopes on a government bailout.

The government has taken notice of the sector’s problems. In September, it was said to be planning a relief package for the aviation industry. While this was meant to include a reduction in aviation fuel prices, it actually hiked import duties on aviation turbine fuel, in addition to other items, a month ago in order to defend the rupee.

In order to hold onto its market share at home, Indigo has no option but to play the fare discounting game. In fact, it was forced to scrap a fuel surcharge a few months ago on its ticket prices because none of the other Indian airlines followed suit.

However, unlike its domestic rivals, Indigo has other avenues for offsetting its cost pressures over the next few quarters. It is looking to tap into more international routes, especially in Southeast Asia, and reduce fuel costs by operating lighter aircrafts.
{{}}
Add Comment()
Comments ()
X
Sort By:
Be the first one to comment.
We have sent you a verification email. This comment will be published once verification is done.