IndiGo, India's most profitable airline, is witnessing a slump in profits in the current financial year on the back of higher fuel costs and low margins, airline's president Aditya Ghosh told Business Standard on Wednesday.
The Gurgaon-based low-cost carrier had seen an 18 per cent growth in profits to Rs 650 crore in FY11, but is now feeling the pinch of adverse operating environment. With 51 planes and nearly 20 per cent market share, IndiGo is the second-largest airline by passengers flown.
"Margins were under huge pressure because average price of fuel is now higher than what it was in 2009. There has been a growth in revenue and we will turn out to be profitable at end of the year. It will be much smaller profit than we have done in previous year,'' he said.
Ghosh refused to divulge the profit figure for FY12 but said it "will be a fraction'' of Rs 650 crore profit, which it made last year. "For us profitability means we are able to get spare parts on time, pay salaries on time, maintain integrity of schedules and plan for growth,'' he stated.
According to Ghosh, India's aviation growth story can sustain if the government incentivises and rewards efficient operators. He said the government could reward by offering discounts in fuel and airport charges, and that will serve as an incentive on all operators to perform better and fix their own house.
"I am firmly of the view that we cannot have situation where capacity goes down and there is less number of planes flying when market is growing at 15 per cent, as that would lead to a rise in fares. If fares start rising, there will be an impact on the number of people flying, and whole growth story will start crashing down,'' he said.
This year, IndiGo will be adding nine planes to its existing fleet of 51 planes. Ghosh said he expects to double the size of international operations. At present, three-four of the planes fly on international routes and we plan to increase it to five-six planes, Ghosh added.
"We have just added Vizag and we will be adding two-three more routes this year, but the focus will be on adding frequency on international routes,'' he said.
