What is fueling IndiGo's profit? Things to look for in airline's Q3 results

Higher yields (revenue per passenger) and better fuel savings will result in robust third-quarter profit for IndiGo's on a year on year basis.

Here are three things to look for in InterGlobe Aviation (IndiGo) results which will be announced later in afternoon:

Revenue growth on lower base,  better yields 

Analysts expect the country's largest domestic airline to post between 20-29 per cent revenue growth in third quarter FY 18 on a year on year basis. The third quarter revenue in FY 17 was impacted due to demonetisation and aggressive discounting by the airline. Elara Securities in its results preview noted said that it expects an increase in earning and yields because of "base effect of lower passenger yields" in third quarter FY 17.

Better yields coupled with higher load factors on year on year basis will push the revenue growth for the airline.

Fuel savings to impact profit

Analysts expect IndiGo to report 23-65 per cent increase in net profit on a year on year basis. Apart from higher yields, the airline can also benefit from an increase in fuel saving with induction of Airbus A320neo planes. Currently, about 20 per cent of its 150-strong fleet comprises of A320neo. SBICAP Securities expects IndiGo to post 65 per cent increase in net profit to around Rs 8 billion on back of 10 per cent improvement in yields.

ATR operation

IndiGo began its ATR operation on  December 21 from Hyderabad. Currently, it has three planes and airline has indicated that it will have eight planes of the type by March end. Although it's contribution in Q3 result will be very small, analysts will look for impact on cost and profitability of the airline due to the mixed fleet.

InterGlobe Aviation Q3 FY 17 :

Revenue : 51.5

Ebidtar :  14.6

Net Profit : 4.9

All figures in Rs billion

Ebidtar - Earning before Interest Tax Depreciation Amortisation and Rentals