IndiGo set to cross Rs 10,000-crore revenue for the first time in 10 quarters

IndiGo, the country’s largest carrier by fleet and domestic market share, will declare its first-quarter results on August 3, 2022. The results will be phenomenal when compared to the same period last year. That is because the April- to-June period in 2021 was characterised by the Delta-led COVID wave that had caused air traffic to drop drastically to just essential travel.

The results will breach the psychological barrier of Rs 10,000 crore in income for the first time since the third quarter of financial year 2020. The last financial year was worse than when the pandemic began. IndiGo clocked a loss of Rs 6,161.84 crore for FY22, with the last quarter contributing a loss of Rs 1,681.79 crore. The losses in FY21 when operations were shut for two months stood at Rs 5,806 crore. The airline had sprung a surprise in Q3-FY22 with a profit.

Q1 highlights

The airline closed the quarter with a market share of 56.3 percent, which is 2.5 percent more than in the previous quarter. The airline carried 18.3 million, which was 37.8 percent higher than the previous quarter. It was the best ever quarter in terms of passengers carried since the restart of civil aviation in India and IndiGo made the most of it.

The passenger numbers were 10 percent more than the October to December quarter (Q3-FY22), also the period when the airline had recorded a profit of Rs 129.7 crore.

While traffic was up 10 percent compared to Q3-FY22, the fuel cost was up 41 percent. Fuel comprises anywhere between 35 percent and 40 percent of airline expenses and this raised a question if the quarter would be a profitable one for IndiGo. All indications though are for a positive quarter.

The airline had earned revenue of Rs 9,480 crore in Q3-FY22 with 16.6 million passengers. With the numbers higher by 10 percent this time around, the figure is set to cross the Rs 10,000 crore mark.

What to watch out for?

IndiGo, like many other Indian carriers, has been at the receiving end of its employees. The airline has partially restored salaries and announced further restoration. Employee costs stood at 9.4 percent of total expenses in the last quarter.

The problem with costs is that they are not as elastic as revenue and while costs more or less remain the same, revenue could slump on another wave of COVID. Employee costs went up 6 percent sequentially.

While Air India has shrunk in the last six months and SpiceJet has not utilised all its slots in the schedule, Vistara has inched up slowly to compete with IndiGo on multiple routes. Yet the gap between the market leader and the second is over 40 percent- a luxury very hard to find in any other sector or any other market.

Has that given IndiGo enough power to price itself higher than competition or does it still come under pressure when competition comes in? The answer is not yet very clear.

Tail Note

The current quarter has seen the airline face challenges on the human resources front. This quarter will also see Akasa Air take to the skies. IndiGo has already upped the battle by adding frequency on routes on which Akasa Air is launching services.

What is hurting more than any of this is the drop in traffic. Air traffic in July plummeted in the second half and all eyes are on the long weekends in August and September to see if the quarter can hold some solace.

For now, all eyes will be on the investor call on Wednesday evening. The call is likely to be the last one for Rono Dutta, who is retiring as CEO on September 30, also the end of Q2-FY23.