IndiGo Q4 profit up 400% to Rs 590 crore, rules out slowdown fears

CEO says Jet Airways closure led to structural change in Indian market

India’s largest airline by market share, IndiGo, ruled out any impact of an economic slowdown in air travel growth. “Looking ahead, it is difficult not to be bullish about the future,” IndiGo Chief Executive Officer Ronojoy Dutta said.

Cautious spending by customers on everything from shampoo to cars and travel threatens to weaken what’s been the backbone of the economy, contributing about three-fifths of gross domestic product. India’s car sales saw a decline of 15.9 per cent in April, the worst in eight years. Auto industry executives fear recovery will take time and depend on multiple factors, including a good monsoon and the economic policy of the new government, to take office later this month. 

Similarly, air traffic growth, which was one of the fastest in the world, fell for the first time in six years. However, Dutta’s optimism was based on his calculation that the recent trend of a drop in passenger growth is due to the closure of Jet Airways and the domestic market would recoup in two months. 

“Consumption is not depressed; the recent traffic slip is because passenger growth is intricately connected to capacity availability in the market. Due to shutdown of Jet Airways, a lot of capacity was removed from domestic market, which will return in next two to three months. Our assumption is there would be a growth in flyer number by 8-9 per cent,” he said.

Climbing on the fall of Jet Airways, India’s largest airline by market share IndiGo made a turnaround in the second half of the financial year, managing to eke out a profit of Rs 156 crore. The airline registered a yearly profit, primarily due to the bump in profit during the January-March period in which it had five-fold jump in profit after tax to Rs 589.6 crore, a rise of 401.2 per cent.  

“It is a tale of two halves for IndiGo, with the first half of the year incurring losses and the second half of the year experiencing a sharp recovery,” Dutta said, adding that the u-turn in the last quarter was helped by Jet Airways shutdown. 

The closure of Jet allowed the return of pricing discipline in the market. IndiGo saw its yield grow by 12 per cent at Rs 3.70 per km during January- March period as compared to Rs 3.31 during the previous quarter. 

In a post results call with analysts, IndiGo said the airline would be adding around 64 aircraft in FY20, including 11 turboprop planes meant for flying within short regional routes. The airline will also increase its focus on international routes, taking advantage of the long range A321 planes, 15 of which it will induct this year. 

Dutta said the Indian market had undergone a structural change due following the closure of Jet Airways which is expected to benefit existing players. 

Some of them are availability of more slots in Mumbai airport, a vacuum in the India-Middle East air connectivity which can be exploited by airlines and opportunity to expand to the eastern and ASEAN region, which are considered to be markets with good yield potential. “There are some chokepoints which have been removed following closure of Jet. They are of huge impact,” Dutta said.