Indian airline IndiGo says high costs to curb Q2 profit

IndiGo expects a jump of about 70%-80% in capacity, measured by available seats per kilometre, this quarter from the same period a year earlier, but is concerned about rising fuel costs and a weak rupee. "Seasonal revenue declines in the second quarter, coupled with high costs, will lead to profitability challenges," outgoing Chief Executive Ronojoy Dutta said.

India's biggest airline IndiGo said on Wednesday rising expenses and seasonal weakness posed profitability challenges for the current quarter, despite a pick-up in demand for air travel. IndiGo expects a jump of about 70%-80% in capacity, measured by available seats per kilometre, this quarter from the same period a year earlier, but is concerned about rising fuel costs and a weak rupee.

"Seasonal revenue declines in the second quarter, coupled with high costs, will lead to profitability challenges," outgoing Chief Executive Ronojoy Dutta said. However, the airline will be on the path to profit in the third quarter, Dutta added.

Parent company InterGlobe Aviation posted a loss of 10.65 billion rupees ($134.46 million) for the June quarter, compared with a 31.79 billion rupee loss a year ago, when many Indians avoided flying during the second wave of the pandemic. Fuel prices nearly doubled, leading to a nearly five-fold increase in aircraft fuel expenses to 59.90 billion rupees.

While strong revenue drove the company to profit at an operational level, net profitability was curtailed by fuel costs and foreign exchange, Dutta said. Revenue from operations jumped four-fold to 128.55 billion rupees, boosted by a 145% increase in capacity and a load factor - a gauge of how well airlines fill their planes - of about 80%.

Yields, a metric of profitability, rose 50.3% to 5.24 rupees per kilometer. The results come as IndiGo has seen a churn at the top and amid reports of an exodus of its ground crew and technicians to other airlines.

Competition in India's aviation sector is heating up, with the launch of Akasa Air and the return of full-service carrier Jet Airways. IndiGo, a leader in market share by a wide margin, said on Wednesday it planned to reinstate all pilot salaries by September, after slashing them during the pandemic.