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 low-cost 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 in the Pratt & Whitney engines.
The airline opted to extend leases on older jets and also hired new aircraft to mitigate a capacity shortfall caused by the grounding. For instance, IndiGo inducted 31 aircraft in Q2, of which nine were added as part of this strategy. Elber noted that these "costlier mitigation measures" partly contributed to a net loss of nearly Rs 1000 crore in the September quarter.
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 levels of groundings in the mid-70s during the quarter," Chief Financial Officer Gaurav Negi said. "We're now in the high 60s and we are expecting aircraft on ground to reduce to sub-60 level by the end of 2024 and to mid-40s by the start of the next financial year."
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 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.
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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