IndiGo Q2: Loss up to Rs 1,610 crore seen despite cost cutting measures

Prabhudas Lilladher expects yields to remain strong during the recently concluded quarter, growing 10 per cent YoY, on the back of pricing disciple, charter and Vande Bharat flights

InterGlobe Aviation-owned IndiGo airline is expected to narrow its losses sequentially during the September quarter of FY21 (Q2FY21) as analysts see more people using airlines as a means to travel amid the Covid-19 pandemic. The airline is set to report its quarterly numbers on Thursday, October 29.

During the three month period under review, the stock of the low-cost carrier soared 26 per cent on the BSE, as against a 9 per cent rally in the benchmark S&P BSE Sensex, ACE Equity data show.

Here’s what to expect from Q2 numbers.

Elara Capital

The brokerage pegs the airline's net loss at Rs 690 crore, including forex gain of Rs 230 crore. This is lower than the net loss of Rs 2,840 crore the airline incurred in Q1FY21 and Rs 1,060 crore reported in the corresponding period of the last fiscal.

Riding on the increased domestic capacity, which hit 60 per cent in September from 30 per cent at the end of Q1FY21, and due to minimum airfares cap, the brokerage estimates passenger yield (average fare per passenger mile) to improve 20 per cent on a yearly basis as against 11.4 per cent growth clocked during Q1FY21. That said, they estimate the passenger volume to decline by 71 per cent YoY for Q2FY21, while passenger load factor (PLF) is pegged at 67.5 per cent compared with 83.5 per cent in Q2FY20.

Centrum Broking

Brent crude prices and aviation turbine fuel (ATF) declined sharply by 30 per cent and 32 per cent YoY, respectively during the quarter under review which, analysts at the brokerage said, could lead to lower fuel costs. Given this, per unit fuel cost is expected to decline 33.5 per cent YoY to Rs 0.9.

EBITDAR loss, in this backdrop, is pegged at Rs 190 crore in Q2, compared with a loss of Rs 1,430 crore in Q1FY21. The brokerage estimates IndiGo's cash burn to have declined to nearly Rs 20 crore per day in Q2 from Rs 30 crore per day in Q1FY21. Overall, total net loss is seen at Rs 1,610 crore in Q2FY21.

"We expect average seat kilometers (ASKM) and revenue per kilometers (RPKM) to decline by 66.6 per cent and 73.8 per cent YoY, respectively with load factor at 65.4 per cent, down from 83.5 per cent in Q2FY20. Moreover, we expect a 7 per cent YoY decline in revenue per available seat kilometer (RASK) due to lower load factor," said the brokerage in its report.

Prabhudas Lilladher

The brokerage expects yields to remain strong during the recently concluded quarter, growing 10 per cent YoY, on the back of pricing disciple, charter and Vande Bharat flights. Effectively, capacity utilization is estimated at 34 per cent YoY for the entire quarter.

"Average number of domestic passengers per flight, too, improved from 90 in June to 98 in September. With loads on charters and Vande Bharat flights fairly strong, we expect IndiGo to report sequential improvement of 700bps in passenger load factor (PLFs) to 68.4 per cent. However, we expect passenger RASK to decline for IndiGo by 10.5 per cent due to lower load factors," it said in a results’ preview report.

Additionally, rupee appreciation of 2 per cent during the quarter, mark-to-market (MTM) gains on liabilities may come in at Rs 500 crore.

"We expect IndiGo to report around 66 per cent YoY decline in ASK against the guidance of 60 per cent decline… Improving scale of operations, cost initiatives, soft ATF prices and appreciating rupee will help narrow down losses QoQ to Rs 1,446.3 crore while sales are seen at Rs 2,555.9 crore," the report added.

Kotak Institutional Equities

"We expect a 69 per cent yearly decline in revenues on account of around 73 per cent YoY decline in passenger volumes. Our passenger count estimate is based on overall flight departure data disclosed by MoCA; therefore, we assume IndiGo's market share at over 60 per cent of total during the quarter," the brokerage noted in its preview report.

Net sales are estimated at Rs 2,511 crore, up an impressive 227.5 per cent sequentially, from Rs 766.7 crore in the June 2020 quarter of FY21. Meanwhile EBITDA loss is seen at Rs 675.2 crore, higher than EBITDA loss of Rs 19.9 crore in the year-ago quarter but narrower from loss worth Rs 1,620 crore in the previous quarter of the current fiscal. EBITDA margin is seen at (-)27 per cent.

"We also model reduction in employee, maintenance and other expenses, although the quantum of reduction will be much lower than the decline in revenues. Base lease rentals and supplementary rentals remain a large cost item and would drive a large PBT loss," the brokerage said.