IndiGo profit soars making record profits in FY24; to have business class soon

IndiGo reported a net profit of ₹1,894.8 crore for the quarter, almost beating analysts’ expectations of ₹1,900 crore. This profit builds on a record-breaking year for the company, with a full-year profit of ₹8,172 crore. It marks a significant turnaround from a loss of over ₹300 crore in the previous fiscal year. This is the sixth consecutive profitable quarter for the airline, driven by robust passenger demand despite rising fuel prices.

The company’s revenue from operations also witnessed a healthy increase of 26 per cent to ₹17,825.3 crore, compared with ₹14,161 crore in the previous year. However, it is short of analyst estimates of ₹19,452 crore.

IndiGo’s profitability is further reflected in a jump in its EBITDAR (earnings before interest, tax, depreciation, amortisation, and rent) to ₹4,412.3 crore, compared to ₹2,966.5 crore a year ago. This translates to an improved EBITDAR margin of 24.8 per cent, up from 20.9 per cent in the previous year.

Passenger traffic also saw a significant rise, with the airline carrying 235.97 lakh passengers in the quarter, capturing a market share of 60.3 per cent. This represents a growth of 14 per cent compared with the same period last year.

During the earnings call, IndiGo CEO Pieter Elbers provided insights into the company’s future plans. He indicated an expectation of capacity growth in the “early double digits” for the next fiscal year (FY25). He added that currently, 27 per cent of the airline’s capacity is deployed on international routes, contributing 20-25 per cent of its revenue.

IndiGo’s financial health appears robust, with a total cash balance of ₹34,737 crore, including ₹20,823 crore of free cash. However, the company’s total debt also rose 14.3 per cent year-on-year to ₹51,280 crore.

IndiGo’s profitability is further bolstered by a 7 per cent increase in yields (revenue per available seat km) to ₹5.19. However, the airline’s load factor, which measures the percentage of available seats filled, improved by only 2.1 percentage points to 86.3 per cent. This suggests IndiGo is prioritising higher fares over maximising passenger capacity.

“We are excited to announce that IndiGo will offer business-class services on our flights by the end of 2024,” Elbers said. “The premium class travel option will initially be offered on the busiest and business-oriented routes. We will reveal more details about launch dates, routes, and fares in August 2024.”

“While IndiGo has benefited from the post-pandemic recovery in domestic air travel, we acknowledge the anticipated impact of inflation on maintenance expenses and airport fees in FY25,” Elbers added.

IndiGo faces competition from new entrants like Akasa Air and the potential merger of Air India and Vistara under the Tata Group. While IndiGo has gained market share following the grounding of GoAir, these new players add a layer of complexity to the Indian aviation market.

“I believe the high profits come from limited growth in the number of flights offered in India, combined with IndiGo’s extensive network reach,” said Ameya Joshi, founder of Network Thoughts. “However, it’s important to note that these profits haven’t fully covered the losses incurred during the Covid years.”

“The current strategy gives IndiGo the flexibility to experiment with new routes and products without taking on a huge financial risk,” Joshi added. “This is because the cost of failure is not very high for IndiGo’s revenue size, given their strong financial position.”

In the first quarter of 2019 (January-March), which was before the pandemic significantly impacted air travel, IndiGo carried 156.93 lakh passengers. This strong performance translated to a market share of 44.3 per cent for the airline during that quarter.

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