InterGlobe Aviation Ltd., the operator of IndiGo, expects about 40% of its grounded fleet back in operation by April after costs related to idle aircraft dragged the budget carrier to its first quarterly loss in two years.
"We have turned the corner as the number of grounded aircraft and associated costs have started reducing,” Chief Executive Officer Pieter Elbers told analysts in a post-earnings conference call on Friday.
IndiGo had about 75 aircraft, or about a fifth of its total fleet, grounded last year in November mainly due to defects with the Pratt & Whitney engines.
The airline opted to extend leases on older jets and also hired new aircraft as part of mitigation measures, and that have been adversely impacting its finances. For instance, IndiGo inducted 31 aircraft in the second quarter, of which nine were inducted as part of the mitigation measures.
These "costlier mitigation measures" partly contributed to the airline's first loss in seven quarters. It posted a consolidated net loss of Rs 987 crore in the July–September quarter against a profit of Rs 189 crore in the year-ago period.
Now the number of grounded aircraft has reduced to "high sixties". These aircraft are either waiting for parts due to supply-chain challenges or undergoing inspections after Pratt & Whitney recalled hundreds of PW1100G engines.
"We have reached the peak numbers of groundings in the mid-70s during the quarter," Chief Financial Officer Gaurav Negi said. "We're now in the high 60s and we expect aircraft on ground to reduce to under 60 by the end of 2024 before dropping to the 40s by April."
As of Sept. 30, IndiGo had a fleet of 410 aircraft, the largest in India.
As more of IndiGo's grounded aircraft return to service, Negi said that the mitigation-related costs too should reduce, thereby aiding IndiGo's bottom line in the coming quarters. In the September quarter, aircraft and engine rentals costs rose nearly four times to Rs 764 crore from Rs 196 crore a year ago, while supplementary aircraft rental and maintenance costs jumped nearly 30%.
IndiGo's overall expenses surged 22% for the quarter, outpacing a 13.6% rise in revenue. A 13% rise in fuel costs and inflation across various lines also weighed on the financial performance. Negi added that congestion at airports is leading to an increase in block times and, therefore, more fuel burn. "So that's a little bit of an inefficiency that we have, but obviously efforts are being taken to reduce or improve the congestion."
IndiGo expects capacity, measured in available seat kilometre, to grow by low-double-digit percentage in the third quarter from a year earlier. It is also seeing a comeback of demand in October.
But the overall competition could moderate yields or the average price per seat sold, said Negi. Notably, the likes of Air India Express and Akasa Air have announced a sale, which includes flying dates during Diwali.
"A single digit to mid-single digit moderation is likely for the third quarter vis-a-vis the last year... but we are committed to continue our cost leadership," said Negi.
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