Profitability of IndiGo Airlines

Analysts expect the country’s largest domestic carrier IndiGo Airlines to post between 20 and 29 per cent revenue growth in third quarter of FY18 on a year-on-year basis. The third quarter revenue in FY17 was impacted due to demonetisation and aggressive discounting by the airline. Elara Securities in its results preview noted that it expects an increase in earning and yields because of “base effect of lower passenger yields” in third quarter FY17. Better yields coupled with higher load factors on year-on-year basis, will push the revenue growth for the airline.

Analysts expect IndiGo Airlines to report up to 65 per cent increase in net profit on a year-on-year basis. Apart from higher yields, the airline can also benefit from an increase in fuel saving with induction of Airbus A320neo planes. Currently, about 20 per cent of its 150-strong fleet consists of A320neo. SBICAP Securities expects the airline to post 65 per cent increase in net profit to around Rs 8 billion on the back of ten per cent improvement in yields. The airline began its ATR operations on December 21, 2017 from Hyderabad. Currently, it has three aircraft and has indicated that it will have eight planes of the type by the end of March 2018. Although its contribution in Q3 result will be very small, analysts will look for impact on cost and profitability of the airline due to the mixed fleet.