 "IndiGo's profit drops by 18.3% due to rupee depreciation, grounded planes")
IndiGo’s consolidated net profit fell 18.3 per cent to Rs 2,448 crore in the third quarter of 2024-25, impacted by rupee depreciation and a high number of grounded planes, despite strong demand.
During the conference call with analysts, Chief Financial Officer Gaurav Negi said: “While our top line performance exceeded our expectations, profitability was adversely impacted due to rupee depreciation during the quarter. The third quarter saw continued weakness in the rupee, primarily due to the strengthening of the US (United States) economy, and at the end of the quarter it depreciated around 2 per cent as compared to the end of the September quarter, resulting in a mark-to-market foreign exchange loss of around Rs 1,400 crore.
“Our exposure to foreign-exchange risk is largely due to a significant portion of our lease liability and maintenance obligations, which are denominated in dollars. According to accounting norms, we accrue the currency impact at the quarter end,” he added.
While the currency remains volatile and further depreciated in January, the airline has been taking steps to reduce the impact of this churn by hedging part of the foreign-currency outflow.
“This quarter we have recorded a gain of Rs 59.1 crore on our hedging contracts. We will enhance our hedging positions as we add more international capacity. We expect the natural hedges to also improve,” Negi noted.
Negi said the airline showed an increase in profit if the impact of foreign-exchange depreciation was excluded.
Also Read
“Excluding the impact of the foreign-exchange movement, we reported a profit of around Rs 3,850 crore with a margin of 17.4 per cent, compared to Rs 3,050 crore with a margin of 15.7 per cent in the corresponding period last year. This reflects a growth rate of around 26 per cent on a year-on-year basis. Our strong financial performance was primarily driven by strong demand in the domestic market, continued investment in capacity to cater to this demand, and benign fuel prices. In terms of revenue performance, we have done better than our guidance as the demand came in stronger than anticipated in November and December,” he stated.
The number of grounded planes, according to Negi, in the airline’s fleet is somewhere “in the 60s” now. The airline’s fleet comprises 437 planes. These planes are grounded due to issues with Pratt and Whitney engines.
“While sequentially the CASK (cost per available seat km) ex-fuel ex-forex remained stable at 2.9 on a year-on-year basis, it has increased by around 10 per cent over the same period last year, primarily due to grounding-related costs and contractual escalations across line items (costs specified in contracts with vendors or service providers) and annual increments (of employees),” Negi noted.
CASK measures an airline's operating cost to fly one seat for 1 km, reflecting overall efficiency.
The airline, according to the CFO, is now past the “peak” of groundings and they are going down.
“Currently, based on the latest guidance from the OEM (Pratt and Whitney), we will begin the next financial year with groundings in the range of 40 and expect the number to further go down as the year progresses," he stated.
IndiGo Chief Executive Officer Pieter Elbers, during the conference call, said the airline planned to expand its recently-launched business class services on major routes.
“We launched IndiGo’s business class called ‘IndiGo Stretch’ on the Delhi-Mumbai route in November, and to build on that momentum, we have launched the business class on the second route Delhi-Bengaluru more recently. We are gearing up to launch the business class on Delhi-Chennai very soon. This year we will launch business class on 10 more metro-to-metro routes across the country, with some 45 aircraft,” he stated.
Elbers said the airline operated flights to 90 domestic destinations. Internationally, the airline operates services to 38 destinations and it wants to add at least two more to its global network by the end of this year, he noted.
He said there were some key international markets that were “underserved”, and they represented vast potential.