IndiGo Q3 net falls 25% on note ban, fare war

Airline to add six destinations this year

Demonetisation and an airline fare war resulted in a 25 per cent decline in IndiGo's net profit in the December quarter to Rs 487 crore from Rs 650 crore in the same period a year ago.

The airline said it was able to offset the impact due to cost control and a higher load factor. While the cost available seat kilometer (CASK) decreased by 7.5 per cent, IndiGo’s load factor increased by 2.7 per cent.

IndiGo, the country's largest airline by market share, increased its revenue by 16 per cent to Rs 498.64 crore during the quarter but yields fell due to demonetisation. Overall traffic grew in November and December but yields fell 20 per cent and 17 per cent, respectively.

The airline continues to face operational issues with the Airbus A320neo aircraft, which has delivered on fuel savings but snags have resulted in disruptions and higher than expected engine replacements. IndiGo President Aditya Ghosh said the airline was receiving support from Airbus and engine maker Pratt & Whitney.

The airline said it would add seven aircraft till March, increasing its fleet to 133. Originally, the airline had said it would have a fleet of 136 aircraft by March. IndiGo will add six destinations over the next few months, including Sharjah, Dhaka, Doha, Amritsar, Mangalore and Madurai.

“We have reported yet another profitable quarter despite lower yields and higher fuel prices. We see robust traffic growth ahead and we will continue to strengthen our network with a view to maximising long-term profitability,” Ghosh said.

The airline was also affected by higher landing charges at the Mumbai and other airports. Non-fuel costs declined by 8 per cent, however, due to increased aircraft utilisation and higher employee productivity.

“IndiGo continues to be a solid growth engine for the industry. However, resetting of profitability expectations is critical. The industry will add 60-65 aircraft in 2017-18, which will increase supply significantly and with cost creep of over 10 per cent likely we see profitability challenges,” said Kapil Kaul, South Asia CEO of the Centre for Aviation.