IndiGo may increase airfares to compensate for rising fuel prices. The airline posted its third straight quarter of losses despite its revenue and operating earnings rising significantly, beating Bloomberg estimates. InterGlobe Aviation, the parent company of the country’s largest airline, reported Rs. 1,879 crore reported a consolidated net loss. Which a year ago was Rs. 2,582 crore less than the loss of 27.2 percent. The loss is Bloomberg’s Rs. 2,063 crore was lower than the estimate, mainly due to reduction in foreign exchange losses. CEO Willie Walsh said fuel prices have risen sharply. We have no choice but to increase the rent to compensate for this. This suggests that passengers may now have to pay higher ticket prices.

Earnings figures remained like this

Income from operations rose 25.9 percent year-on-year to Rs. 23,364 crore, which last year was Rs. 18,555 crores. This is Bloomberg’s Rs. 22,988 crore is higher than the estimate. Earnings before interest, tax, depreciation and amortization (EBITDA) rose 229.1 percent to Rs. 1,907 crore (from Rs. 580 crore earlier), which is Rs. 1,663 crore was better than the estimate. EBITDA margin increased to 8.2 percent from 3.1 percent a year ago. This improvement in operating performance was not enough to offset the huge increase in costs. According to the company’s report, total expenditure increased by 19 percent year-on-year to Rs. 26,188 crore, while fuel costs increased by 67 percent to nearly $1 billion.

Less loss from foreign exchange

Foreign exchange loss in the same quarter last year was Rs. 2,892 crore down to Rs. 1,333 crores. Stripping out the impact of foreign exchange, IndiGo had Rs. 724 crore in loss, while the company posted a loss of Rs. 104 crore profit was made. Walsh attributes this pressure to very high aviation turbine fuel (ATF) prices and the current geopolitical turmoil. He said the ‘refining crack spread’ (i.e. the difference in price of refined fuel compared to crude oil) has averaged 65 per cent this year, compared to the historical average of around 22 per cent. Due to this reason the price of jet fuel remained high.

How many passengers flew in Indigo?

During the quarter, IndiGo carried 2.75 crore (27.5 million) passengers, down 4.7 percent compared to the same period last year. At the same time, capacity measured as ‘Available Seat Kilometers’ (ASK) fell by 1 percent to 40.8 billion. Passenger traffic fell by 3.7 percent to 32.8 billion ‘revenue passenger kilometers’ (RPK), and passenger load factor fell to 80.3 percent from 82.5 percent. However, passenger yield increased by 34.3 percent to Rs. 6.30, which supported revenue despite a decline in passenger numbers.

How much debt does the company have?

Walsh said September was the weakest month of the quarter, but he is optimistic about demand for the holiday season. The airline expects ‘low single digit’ (ie below 10 per cent) capacity growth in the December quarter. Walsh said Indigo will continue to take measures at its own level to control costs, but the company is not planning any major ‘cost-cutting’ programme. At the end of September, the airline’s total debt stood at Rs. 87,303 crore, of which Rs. 55,159 crore includes ‘Capitalized Operating Lease Liabilities’ (liabilities relating to leased aircraft). At the same time, the company has a total cash of Rs. 52,685 crores. Despite the short-term pressures, IndiGo is fully committed to its international expansion plans and plans to induct the Airbus A350 wide-body aircraft in 2028. “We are not going to delay any of our long-term plans,” Walsh said.