IndiGo slips into losses due to exchange rate and higher fuel price

To deploy 60% more capacity in FY23 as it sees demand improving

Severely hit by the rise in jet fuel prices and higher exchange rate, India’s largest airline, IndiGo, posted a loss of Rs 1,681 crore in the quarter ended March 31 (Q4).

The airline’s fuel expenses increased 68 per cent to Rs 3,220.58 crore in Q4, from Rs 1,914.45 crore in the corresponding period last year. The loss was significantly higher than the average estimate of Rs 830 crore from analysts tracked by Bloomberg.

The company had reported a small, but surprise profit of Rs 128 crore in Q3.

The rise in expenses eclipsed the airline’s superior top line performance as it earned 29 per cent higher revenue at a better yield of Rs 4.24 per kilometre, compared with Rs 3.76 a year ago.

Despite the loss, the airline said it will deploy significantly higher capacity this year as it sees demand improving after two years of lull because of the Covid-19 pandemic.

The airline will deploy 60 per cent more capacity in financial year 2022-23 (FY23) as compared with FY22, when it had to severely curtail operation first in April due to the surge of the Delta variant of the novel coronavirus, and then in December and January because of the third wave of the pandemic.

“There is a tug of war going on... between very good revenue performance and a very challenging input cost environment due to the rising fuel price and weakening rupee,” IndiGo’s Chief Executive Officer Ronojoy Dutta said in a post results call.

Jet fuel prices in April were 11 per cent higher than in March, which was already six per cent higher than in February.

Dutta, however, said the airline’s superior performance, which allows it to get more market share, will compensate for the challenging environment. “We believe IndiGo is best positioned to maximise revenue in a recovering market. As we work to return the airline to profitability, we are focused on maintaining our cost leadership position and continuing to build the most efficient network in the region,” he said.

The airline is going to face stiffer competition going forward with Rakesh Jhunjhunwala-backed Akasa Air looking to start operations by July. Jet Airways is also all set to resume operations.

However, Dutta feels despite competition, the industry yield will remain strong. “The management of the new airlines are all seasoned players. Hopefully, all the players will focus on better yields,” he said.