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Flying high.
CHARTED

Fasten seat belts: IndiGo’s profits have jumped by 175%

By Manu Balachandran

India’s largest airline by market share has posted a profit for the seventh year in a row.

Since its launch in 2005, Gurgaon-headquartered IndiGo has remained the star performer in India’s turbulent aviation sector. Even as other airlines in the country have grappled with losses or marginal profits, IndiGo has delivered robust results year after year.

On Sept. 10, the airline announced that net profit for the 2015 fiscal rose to Rs1,304 crore ($196 million), compared to Rs473 crore ($71 million) in 2014—an increase of 175%.

Those numbers will come in handy as the airline now plans to go public and raise some Rs2,500 crore ($400 million) to expand its fleet, reduce debt and purchase ground support equipment.

“The secret sauce is simple,” Aditya Ghosh, president and CEO of IndiGo, told the Mint newspaper. “We are founded by airline people. And we are run by airline people. The promoters understood the Indian opportunity. They knew what to do. More than that, they knew what not to do.”

IndiGo’s healthy profits are largely due to its strong revenue growth—the airline carried more than 50% of the addition in India’s domestic passengers in 2014—and a strategic sale-and-leaseback model.

“We generally assign our right to purchase each aircraft under our purchase agreement with Airbus to a third-party lessor and lease the aircraft from the lessor following delivery of the aircraft under a sale-and-leaseback agreement,” the company said in its draft red herring prospectus, submitted to India’s market regulator.

The airline is now awaiting the delivery of 250 new aircrafts from European aircraft maker, Airbus, for which it signed a deal in October 2014 for a record $26.6 billion.