IndiGo Says PW Engine Issue Is Likely To Have An Impact On Future Capacity

With Directorate General of Civil Aviation ordering IndiGo to replace all A320neo aircraft with unmodified Pratt and Whitney engines by Jan. 31, the airline on Wednesday designated this matter as one of "revenue headwinds" and said it is "likely to have an impact on future capacity".

On Nov. 1, aviation regulator DGCA had asked IndiGo to replace all unmodified PW engines on its 97 A320neo family aircraft or face grounding of planes.

Later, unsatisfied with IndiGo's speed in replacing the unmodified PW engines, the regulator on Nov. 25 instructed it to ground an old A320neo family aircraft with an unmodified PW engine for every new A320neo plane added to its fleet to prevent large-scale cancellation of flights from Jan. 31 onwards.

On Wednesday, in its presentation to investors and analysts, InterGlobe Aviation Ltd. said that PW engine issues is "likely to have an impact on future capacity".

It said it is expecting a capacity increase of 15-20 percent in fourth quarter of 2019-20.

The airline added that the overall capacity increase would be 22-23 percent in 2019-20 as against earlier stated guidance of 25% announced during Q2 earnings.

The company has lowered its capacity growth guidance for the second time in last 45 days. During Q2 earnings, IndiGo had lowered its capacity growth guidance to 25 percent from 30 percent for FY20. Despite expected MTM forex losses, it expects profits in Q3FY20 to be similar to last year. RASK and CASK are expected to increase by about 4-5 percent in Q3FY20, it added.

The PW engine-powered A320neo planes in the fleets of IndiGo and GoAir have been facing glitches both mid-air and on-ground since their induction way back in 2016.

The airline, in its presentation that was posted on BSE's website, said that adverse movement in fuel prices "and/or foreign currency" from the current levels are "major risks".

The budget carrier stated that pilot shortage, uncertainty on Jet Airways' slots and bilateral rights, risk of losing other bilateral rights and PW engine issues are the major "revenue headwinds" of 2019-20.

After Jet Airways ran out of funds, it had shut down operations on April 17 and this led to a sudden rise in domestic and international airfares.

Consequently, the Centre decided to temporarily allocate the slots as well as international flying rights of Jet Airways to other airlines to start new flights to fill the supply gap.

A slot is a date and time on which an airline's aircraft is permitted to depart or arrive at an airport.