India's biggest carrier in terms of domestic market share and fleet, IndiGo expects aircraft grounding due to engine issues with Pratt & Whitney's new Airbus A320neo models to increase from January 2024, the company's management has said.
"Looking ahead demand remains robust, however, we face headwinds in the form of aircraft grounding due to engine issues pertaining to Pratt & Whitney supply chain challenges," Chief Executive Officer (CEO) Pieter Elbers said while speaking in a post-earnings conference call on November 3.
Gaurav Negi, Chief Financial Officer (CFO) of the airline, added that IndiGo will see a higher number of aircraft being grounded due to engine issues from January 2024.
"We have recently received further communication from our OEM Pratt & Whitney with respect to powder metal issues. Globally, we understand that a large number of incremental engines are being removed for shop visits between 2023 and 2026. The majority of these engine removals are being planned for 2023 and early 2024," Negi said in the conference call.
He added that IndiGo's estimates indicate that these accelerated inspections and incremental shop visits will further impact its operating fleet from Q4 onwards and will lead to a higher number of groundings.
He added that at the moment IndiGo has over 40 aircraft grounded due to P&W engine issues.
The parent company of Pratt & Whitney, RTX Corp, had announced in September that it would be increasing the scope of recent engine inspections.
The Pratt & Whitney turbine engine used on new Airbus A320neo models has been manufactured with flawed components. This will ground hundreds of aircraft and affect nearly the entire fleet of GTF-powered Airbus A320neos.
IndiGo currently operates 176 A320neo as part of its fleet of 334 aircraft.
While IndiGo did not quantify how many aircraft it expects to be grounded after January 2024, Pieter Elbers added that IndiGo is confident of meeting its guidance of 15-19 percent fleet expansion in 2023-24 when compared to a year ago.
However, he added that the expected rise in grounded aircraft has hindered IndiGo's ability to accurately give an estimate of fleet expansion in 2024-25 and the airline will come out with guidance for the next financial year in the future after assessing the impact of grounded aircraft.
"IndiGo has taken a number of measures including leasing new aircraft, and reintroduction of older Airbus CEO aircraft to mitigate the issue of grounded planes. Going forward IndiGo will take new measures to mitigate the issue of grounded planes," Elbers added.
The CEO also said that IndiGo is scheduled to take delivery of one new aircraft every week starting April 1, 2024, which will help the airline continue expanding its fleet.
Negi added that P&W usually takes 250-300 days to carry out an inspection of its engine, leaving the aircraft grounded during the period.
He also said that IndiGo's ability to command cheaper rates in the secondary aircraft leasing market due to its size of operations and reputation will help the airline tide over a tough period.
Negi also said that while IndiGo leasing costs are likely to rise due to the mitigating measures it intends to take to offset aircraft grounding, strong air passenger demand will help the airline's financials.
Elbers added that IndiGo is confident that India's domestic air passenger demand will continue to grow in the coming years.
He added that IndiGo's newly-launched international flights to central Asia and Jakarta have seen a very successful start with flights seeing 80 percent load factors so far.
He also said that IndiGo is exploring launching new flights to Denpasar International Airport in Bali, Indonesia and Prince Mohammed Bin Abdulaziz International Airport in Madinah, Saudi Arabia.
He added that currently 26 percent of IndiGo's available seat kilometres are being deployed on the airline's international routes, which it plans to increase to 30 percent soon.
Elbers also said that IndiGo's growing international network gives the airline the flexibility to tap into the global market should domestic air traffic take a hit going forward.
The Pratt & Whitney engines, called the GTF PW1100G-JM and the PW1400G-JM, are a shared venture program. However, Pratt & Whitney owns a 51 percent share in the programme.
The engine is currently utilised on the Airbus A320neo family of aircraft. It is one of two engine sets offered on the family, with the other option being a CFM International power plant system.
The problem, which the company first disclosed in July, stems from defects with powder metal used to make some of the popular Pratt & Whitney geared turbofan engines, a flaw that can cause cracks. RTX said that about 600 to 700 engines beyond the company’s early forecast will have to be removed for shop visits through 2026.
The company estimated an average of 350 Airbus A320 family planes per year will be grounded from next year through 2026. The airline said it expects the issue to cost up to $7 billion.
InterGlobe Aviation, the operator of low-cost airline IndiGo, on November 3 posted a profit of Rs 188.9 crore for the quarter ended September 2023 compared to a net loss of Rs 1,583.33 crore in the same period a year ago.
Revenue from operations for IndiGo, the largest airline in the country, rose 19.5 percent to Rs 14,943 crore from the year-ago period when the airline had reported a topline of Rs 12,497 crore.
The surge in revenue was led by a sharp rise in domestic travel during the quarter as demand for domestic travel in India has continued to surge for the past three quarters.
In the quarter ended September 2023, IndiGo carried 234.09 lakh passengers commanding a market share of 60.7 percent during the quarter. Last year, during the same period the airline had carried 175.16 lakh passengers commanding a market share of 58 percent.
In the pre-pandemic year of 2019, during the July-September quarter, IndiGo had carried 167.93 lakh passengers commanding a market share of 49 percent during the quarter.
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