Aircraft grounding factored-in, won’t impact Q3FY23 capacity addition, says IndiGo CEO

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Airline major IndiGo plans to increase capacity by around 25 per cent in Q3FY23 on a year-over-year basis, the airline’s chief executive Pieter Elbers told Moneycontrol.

Notably, the plan comes at a time when the airline has grounded 30 aircraft due to supply constraints. The sector faces shortages of spares, engines and aircraft, which have restricted capacity and pushed up fares.

Also Read: IndiGo flights to connect Arunachal's first airport with Mumbai, Kolkata from November 28

In a conversation with Moneycontrol, Elbers revealed that capacity will increase by around 25 per cent in Q3FY23 on a year-over-year basis, after accounting for the 30 aircraft on the ground.

“We are adjusting our fleet plans and lease returns to ensure minimal disruptions in our future capacity,” he said. “We are continuously working on mitigating measures to ensure continuity in our network and operations.”

Capacity augmentation

According to Elbers, to address the planned capacity, the airline is looking at measures such as slowing down redeliveries through lease extensions, exploring reinduction of aircraft and evaluating wet-lease options within the regulatory guidelines.

“We are bullish on the market opportunities and will continue to add flights in existing and new markets.”
Currently, the sector is seeing healthy demand despite high fares.

“We have seen 100 per cent recovery in corporate or business travel in April and May,” he said. “Passengers are even exploring offbeat markets like Pantnagar, Agra, Bareilly, apart from the popular destinations like Srinagar, Leh, Dehradun, Bagdogra and Goa.”

Headwinds

However, Elbers pointed out that rupee depreciation vis-a-vis the US dollar and high jet fuel prices continue to be a major headwind to the airline’s profitability.

In Q2FY23, IndiGo’s CASK (cost per available seat km) increased by 1.3 per cent to Rs 5.15 as compared to the June 2022 quarter primarily due to an increase in fuel costs.

Per the Q2FY23 results, jet fuel costs rose to Rs 6,257.90 crore from Rs 1,989.40 crore during the like period of the previous fiscal year.
The airline has reported a net loss of Rs 1,583 crore against a Rs 1,435.6 crore loss incurred during Q2FY22.

In contrast, IndiGo’s Q2FY23 YoY revenue from operations rose to Rs 12,497.60 crore from Rs 5,608.50 crore.

Rising traffic

The airline ferried 19.7 million passengers in the second quarter against 11.2 million carried in Q2FY22.

“While fuel, forex and inflation continue to pose headwinds, we are reasonably confident that we will return to operational profitability in the third quarter,” he said.

Domestic expansion

Furthermore, Elbers said the airline will continue to expand its domestic network to “catalyse the transition from rail to air travel for first-time flyers”.

The airline has introduced connections to many new regional markets, including Darbhanga, Durgapur, Bareilly, Kanpur, Agra, Gwalior, Kadapa, Pantnagar and Deoghar.

International thrust

“With our fleet expansion, we do expect the coming years to have a higher share of international flights,” Elbers said. Currently, about 25 per cent of IndiGo’s total seat kilometres deployed (available seat kilometres) are for international flights.

“Some of our pre-Covid footprint markets are still closed or capacity restricted, such as China,” he said. “However, our progressive capacity recovery in markets in the Middle East and South-east Asia, without such constraints, is strong and on track for full reinstatement by the early part of next year.”

As of September 30, IndiGo had a majority share in the domestic air passenger market. The airline has a fleet of 279 aircraft and operates over 1,600 daily flights, connecting 75 domestic and 26 international destinations.