IndiGo's street-beating results in the second quarter come on the back of a combination of forex gains, better-than-industry capacity utilisation, lower wage bill and a record performance by its cargo team.
These factors helped the airline restrict losses to Rs 1,194.8 crore, just marginally higher than the year-ago number of Rs 1,062 crore. It was a vastly improved performance from the first quarter, when the country's largest airline incurred a loss of Rs 2,844 crore.
So how did IndiGo manage to do something that its peers will struggle to match? Here are a few things that helped.
Forex gain: The airline got a Rs 513 crore forex gain, as compared to a loss of Rs 451 crore, a year ago. Without this, its losses would have mounted to over Rs 1,600 crore.
Capacity utilisation: Earlier in the day on Thursday, aviation advisory firm CAPA India said the average capacity utilisation of Indian carriers, by the end of September, stood at 35 percent.
IndiGo, on the other hand, entered the second quarter with a capacity utilisation of over 30 percent, and ended it at 47 percent, much above its peers. At present, CEO Ronojoy Dutta informed during the post-results analyst call, the airline is using 58 percent of its capacity, just a shade below the 60 percent cap set by the government.
Dutta expects the government to increase the cap to 80 percent "in the next few weeks." IndiGo, the CEO added, will reach the cap limit by the end of the year, or early 2021.
The airline also managed to increase its yield (determined by dividing passenger ticket revenue by revenue passenger kilometre) by 8.9 percent. Giving a peek into what the airline did right, Chief Strategy and Revenue Officer Sanjay Kumar said that the carrier made the most of the traffic flow.
While initially after the lockdown was lifted, the traffic flew from metro to non-metros, the trend reversed in the ensuing months. Also, capacity restrictions at metros such as Mumbai and Kolkata - owing to local administration directives - also helped better the yield.
Lower wage bill: IndiGo spent Rs 467 crore less on salaries in the second quarter of the present fiscal, as compared to the last financial year. This 38 percent reduction, along with the 79 percent lower fuel costs, helped keep a check on overall costs.
The airline had let go of 10 percent of its employees, cut salaries and sent a significant part of its people on leave without pay.
While Dutta signalled that the company will be calling back its employees as capacity utilisation improves, CFO Aditya Pande was quick to qualify that the airline intends to keep salary costs 30 percent lower than its pre-COVID-19 levels.
Cargo, the hero: There was palpable excitement in the voice of Dutta when an analyst asked about the cargo operations. "We have managed to grow cargo revenues by 27 percent at a time when our overall capacity utilisation is much lower compared to the same time, last year," Dutta said.
IndiGo doesn't have a freighter, and carries cargo in the belly of its aircraft.
"We started July with a growth of 9 percent. This increased to 20 percent in August and 27 percent in September," Dutta remarked.
While Pande declined to give a break-up on the cargo revenue, Dutta said that much of the ancillary income - of Rs 506 crore - came from cargo operations.
Rs 1,800 crore from monetisation: The company put four of its ATR aircraft and three of Airbus A320ceo planes on sale and lease-back model. Pande said that the company plans to put seven more of its ATR on the SLB model.
Overall, in the next two quarters, the company will raise another Rs 3,000 crore by monetising its assets.