Analysts see up to Rs 2,700 crore loss for IndiGo in June 2021 quarter

High oil prices and weaker rupee is likely to hit financial performance in Q1FY22

The April to June 2021 quarter (Q1FY22) might have been “one of the worst quarters” for the Indian airlines, believe analysts, as air traffic remained muted amid the second wave of Covid-19, oil prices rose, and the rupee depreciated sequentially.

Against this backdrop, experts believe listed airline companies – InterGlobe Aviation (IndiGo) and SpiceJet -- may post yet another quarterly loss for the period under study. In fact, they believe the sector may not turn profitable during this fiscal year.

“Domestic traffic was down 53 per cent in Q1 versus the previous quarter, 70 per cent lower than pre-Covid-19 levels and 10 per cent lower than our forecast of 12.2 billion passengers. Given this, we forecast yields to be soft. Further, fuel price was up 85 per cent YoY and 12 per cent QoQ in Q1 while the rupee was about 2 per cent worse QoQ. Thus, we forecast a Rs 3,700 crore net loss at IndiGo and Rs 740 crore net loss at SpiceJet,” noted analysts at HSBC in an earnings preview report.

Between the two, IndiGo is set to report its Q1FY22 results on Tuesday, July 27. Here’s what leading brokerages expect:

HSBC

As per data provided by aviation watchdog DGCA, the airline carried around 6 million domestic passengers in the quarter, which was 53 per cent lower than last quarter. On the international side, the brokerage forecasts half a million passengers for the quarter. Given this, IndiGo is expected to report a cumulative load factor of 58.7 per cent.

Overall, net loss is pegged at Rs 3,732.8 crore; revenue at Rs 3,620.9 crore; and Ebit loss at Rs 3,381.9 crore. Operationally, the brokerage forecasts passenger yield per RPK (revenue passenger kilometers) to decline by 15 per cent year-on-year (YoY) since the yield in Q1 last year was positively impacted by charter operations and international operations under bubble agreements. However, it thinks the yield in Q1FY22 will be slightly higher than Q4FY21, given some increase in fares.

Centrum Broking

According to the brokerage, domestic aviation turbine fuel (ATF) prices grew 12 per cent sequentially (up 81 per cent YoY) to Rs 63.1/litre, led by a 13 per cent quarter-on-quarter (QoQ_ rise in Brent crude to $69/barrel. However, the government had hiked the lower domestic fare limit by 5 per cent effective April 1, 2021 and further by 13-15 per cent from June 1, 2021. Against this backdrop, these upward fare revisions will provide interim relief to airline companies amid falling traffic and rising crude environment, it said in an earnings preview report.

Revenue is likely to decline by 47 per cent QoQ to Rs 3,299.3 crore while Ebitdar loss is pegged at Rs 948.3 crore. At the bottom line level, analysts at the brokerage estimate net loss of Rs 2,726.3 crore for IndiGo, higher than net loss of Rs 1,160 crore in Q4FY21, but narrower than Q1FY21’s net loss of Rs 2,849.4 crore.

The brokerage’s estimate builds in a forex mark-to-market (MTM) loss of Rs 460 crore, compared with forex loss of Rs 120 crore in Q4FY21, on capitalized operating leases due to depreciation in rupee against the dollar during Q1FY22.

“Further, we expect available seat kilometers (ASKM) and RPKM to decline by 40 per cent and 50 per cent QoQ with a load factor of 59.1 per cent (down from 70.2 per cent in Q4FY21). We expect ticket revenue yield to improve by 7 per cent QoQ to Rs 3.95 (down 13 per cent YoY) but RASK to decline 9.6 per cent QoQ due to 1,110 basis point QoQ drop in load factor,” it said.

Kotak Institutional Equities

This brokerage expects a 50 per cent QoQ decline in revenues at Rs 3,115 crore compared with Rs 6,223-crore revenue earned in Q4FY21. However, the same was at Rs 766.7crore in Q1FY21.

“Decline in passenger levels, load factor and 13 per cent sequential increase in ATF prices will continue to impact Ebitda. Moreover, base lease rentals and supplementary rentals remain large cost items and drive profit before tax (PBT) loss,” it noted in its report.

In absolute terms, Ebitda (earnings before interest, tax, depreciation, and amortization) loss is pegged at Rs 943.3 crore (Rs 1,620-crore loss in Q1FY21 and Rs 549.5-crore profit in Q4FY21). PBT, meanwhile, is projected at Rs 2,588.2 crore for the quarter under review, compared with a PBT loss of Rs 2,849.4 crore in Q1FY21 and Rs 1,159 crore in Q4FY21.

Ebitda margin is seen at -30.3 per cent relative to -211.3 per cent in Q1FY21 and 8.8 per cent in Q4FY21. Moreover, IndiGo's market share is forecasted at around 54-55 per cent of total during the quarter.