India’s largest domestic carrier, IndiGo, has sent tremors in the aviation community with its first quarter results for the financial year 2018-2019 which will end on March 31, 2019. Revenues were higher by 14.5 per cent compared to the same quarter last year; but costs rose by 40.5 per cent for the same period. The increase in costs is driven by three pillars of fuel, foreign exchange and fleet. Earnings Before Interest Taxes Depreciation Amortisation and Rentals (EBITDAR) margins compressed 16.7 per cent while profit declined 13.7 per cent. The overall profit declined by 96.6 per cent compared to the same quarter last fiscal. Yields for the quarter were down 5.4 per cent and only partially offset by higher passenger load factors. IndiGo made up a fraction of the revenue loss per seat by selling more seats. Against a falling yield environment, IndiGo’s costs grew, driven largely by rising global fuel costs and the weakness of the Indian Rupee. Fuel costs rose by 54.4 per cent with fuel constituting 40.1 per cent of the airline’s total costs. Employee expenses also grew by 11.9 per cent reflecting organisational build up and costs related to talent attraction, retention and other benefits.
IndiGo used to return its aircraft after about six years and thus avoid the expensive ‘C’ and ‘D’ checks. With delays in the A320neo deliveries, IndiGo extended leases on their existing ceo aircraft and is hit with these expensive checks. To add to the woes, the weakness of the Rupee magnified the maintenance costs impact as IndiGo gets most maintenance done overseas.