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IndiGo may have just signalled a revival for India’s aviation industry

Niharika Sharma
By Niharika Sharma

Aviation and social media reporter

The first green shoots of recovery are starting to show in India’s troubled aviation sector.

For the quarter ended March, InterGlobe Aviation, which runs the country’s largest airline, IndiGo, has posted a five-fold year-on-year jump in net profit, the firm announced in a filing to the stock exchange yesterday (May 23).

IndiGo’s profit in the January-March period surged to Rs589.59 crore ($84.7 million) from Rs117.64 crore a year earlier, as the budget carrier benefitted from the grounding of aircraft at Jet Airways.

IndiGo flew 15.7 million domestic passengers in the three months, compared with 13.4 million in the year-ago period. Aided by higher passenger volumes and fares, revenue from operations also jumped 36% year-on-year to Rs7,883 crore in the quarter.

“The situation at Jet Airways, during February and March, increased our unit revenue by 3-4%,” IndiGo’s chief executive officer Ronojoy Dutta told analysts at a post-earnings conference call.

The profits in the last quarter of financial year 2019, marks a sharp turnaround from the precarious financial situation the airline was in, during the first half of the year.

 

The wafer-thin profits in the June quarter and a loss in the September quarter, however, weighed on the airline’s full-year earnings.

Profits for the financial year 2019 stood at Rs157.25 crore, down 93% from Rs2,242.32 crore in the previous year.

“Fiscal 2019 was a tough year for the airline industry in India because of high fuel prices, weak rupee, and (an) intense competitive environment. However, it is a tale of two halves for IndiGo, with the first half of the year incurring losses and the second half of the year experiencing a sharp recovery,” Dutta said in the filing to BSE.

IndiGo’s struggles

Profits in the March quarter came despite the hurdles IndiGo faced. There were several instances of engine failure in the airline’s Airbus A320neo planes, forcing the sector regulator, the Directorate General of Civil Aviation (DGCA), to conduct a safety audit.

In February and March, the airline was also forced to cancel over 30 flights a day owing to a shortage of pilots after the airline increased its capacity in September.

Now, the benefits of the additional capacity seem to be finally reflecting in the earnings.

“We find that the markets we serve are responding very positively to this new capacity. That is evidenced by the fact that after continued weakness in October which pulled down our overall quarterly performance, our numbers have improved in November and December,” IndiGo’s co-founder and interim chief executive, Rahul Bhatia, had then said in a statement in January.

The benefits of higher fares, too, look set to continue in the new financial year. “For the first half of April, fares rose by 15%, compared with the same time last year. Some sectors have even witnessed an increase of 40-50% for last-minute travel,” Balu Ramachandran, head of air and distribution of an online portal, Cleartrip told Quartz.

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