A quarter of many firsts? IndiGo gears up to announce Q4 and FY23 results

IndiGo will need to post earnings of Rs 1,225 crore in Q4 to make a profit for the entire year.

IndiGo, India’s largest airline by fleet and domestic market share, will declare its earnings for the fourth quarter and FY23 on May 18. This will be its first results after the airline started operating wet-leased widebody aircraft and comes amid news of a possible order for the widebody in the near future.

The airline started operating its first widebody aircraft on February 1 and plans to soon deploy a high-density B77W to Istanbul from Delhi and move the Mumbai-Istanbul service to B77W this month.

The quarter has been historic. While January-March has traditionally been a weak and lean quarter in terms of traffic, this time, it was the best ever, even beating pre-Covid numbers.

IndiGo will need to post earnings of Rs 1,225 crore in Q4 to make a profit for the entire year. The airline posted a profit of Rs 1,422 crore in the third quarter after losses of Rs 1,064 crore in the first quarter and Rs 1,583 crore in the second quarter of FY 23. The final number will depend on how the airline managed currency fluctuations and yields.

Passengers carried by IndiGo increased 4.7 percent over the third quarter and crossed the 20 million mark for the first time. The airline has consistently operated over half of the daily flights in Indian skies, even as the international increase happens one step at a time.

A major boost in revenue would have come from the deployment of widebody aircraft, adding to the passenger numbers on international routes. The airline crossed the Rs 10,000 crore mark in sales for three consecutive quarters and this could be the first quarter when sales cross Rs 15,000 crore.

Q4 & FY highlights

The airline closed the quarter with a market share of 55.7 percent, exactly the same as in the third quarter, an indicator of how it has grown as much as the market without losing or gaining share, despite headwinds on the engines front.

The airline carried 20.9 million passengers, which is 4.6 percent more than in the previous quarter and 57.3 percent higher than in the corresponding quarter in the previous financial year.

This continues to be the best ever quarter for the airline, having surpassed pre-Covid levels much earlier and only one of three airlines to do so, the others being Vistara and Star Air.

At 76.7 million passengers, IndiGo carried 66 percent more passengers than the 46.6 million fliers in the previous financial year.

The airline will definitely close the year with the highest revenue in its history, even as headwinds in the form of engine issues, a raging war in Europe disrupting supply chains, a depreciated rupee and above-average oil prices continue. The silver lining has been that it has consistently been able to maintain a higher yield and make the most of its position in the market.

What to watch for

The airline has progressively announced reinstatement of salaries. With pilots likely to be in short supply soon, it will be interesting to see how things shape up on the pilots front. IndiGo has the largest pool of pilots employed in India.

Employee costs stood at 9.18 percent in the third quarter, a rise of 11 percent from the second quarter. All eyes will be on other income since the airline has not been explicit about the compensation received from Pratt & Whitney for the delay in delivering engines and performance guarantees, if any.

It will be interesting to listen to what the management has to say about the Pratt & Whitney engine issues and the impact of the suspension of services by Go First.

Tail Note

IndiGo has not had the best of load factors, which is an indicator that it has decided to hold on to yields over passengers. Yet, passenger numbers have kept increasing, partly due to a strong position in the market, monopoly routes and the absence of strong competition beyond metros.

FY23 was fairly in line with past seasonality and not linked to Covid. This gives the airline better control over inventory management, aircraft cycles and maintenance plans and if things stabilise worldwide, it could focus again on fleet renewal.

Will forex losses hamper profitability? The race is to get Rs 1,225 crore in earnings in the fourth quarter so as to end the year on a profitable note. With higher fares, record passengers and without the shadow of the pandemic, if the airline still cannot make a net profit due to forex losses, one would wonder how this industry would ever make money in India.