Bogged down by higher fuel prices and low fares, InterGlobe Aviation, parent of IndiGo, today saw its net profit slump 25 per cent to Rs 487.26 crore in the December quarter while it continues to battle issues related to A320 neo engines.
The largest domestic carrier's admission that problems persist with Pratt & Whitney engines fitted in the new planes assumes significance as IndiGo is betting on neos to steer its ambitious expansion plans amid intense competition.
The airline's net profit declined even as total income from operations jumped to Rs 4,986.49 crore in the third quarter of the current financial year.
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It had a net profit of Rs 650.34 crore on total income of Rs 4,297.76 crore in the quarter ended December 2015.
In the latest December quarter, IndiGo's overall expenses shot up to Rs 4,480.43 crore from Rs 3,415.66 crore in the same period a year ago, according to a regulatory filing.
This was mainly driven by over 40 per cent rise in aircraft fuel costs, which stood at Rs 1,671.20 crore in the third quarter. The same stood at Rs 1,165.86 crore in the year ago period.
"Our profit was lower compared to the same period last year primarily because of lower yield and higher fuel prices. Because of lower yield, RASK (Revenue Per Available Seat Kilometre) declined 13.1 per cent compared to same period last year," InterGlobe Aviation President and Whole Time Director Aditya Ghosh said in an earnings call.
The airline's yield -- an indicator of money earned from a flight -- dropped 16 per cent to Rs 3.48 per kilometre in the latest December quarter from Rs 4.14 seen in the same period a year ago.
According to the airline, demonetisation resulted in a sharp decline in yields in November and December last year.
A320 neo is giving better fuel efficiency at 15 per cent, Ghosh said despite continuing to "face operational issues with neo engine".
"We have experienced higher than expected engine replacements... The airline has already extensively discussed these issues with the engine maker Pratt & Whitney last week," the IndiGo chief said.
According to him, this is called operational disruption and both P&W and Airbus are working to address these issues.
In the meantime, IndiGo continues to receive necessary operational and technical support including the provision for spare engines, he added.
Currently, the airline has 14 A320 neos in its 126-strong fleet and the number is expected to reach 133 by fiscal end.
"We have reported yet another profitable quarter despite lower yields and higher fuel prices. We see robust traffic growth ahead and we will continue to grow and strengthen our network with a view to maximising our long term profitability," Ghosh said in a statement.
"We expect to launch operations in the next 90 days to
Madurai, Amritsar, Mangalore in India apart from Dhaka, Doha and Sharjah on international routes," Ghosh said while talking about expansion plans.
About overall industry trends, a senior IndiGo official said matching low fares offered by rivals is important depending on the fare bucket concerned.
However, the official also indicated fares might rise in the coming weeks as the airline is mulling passing on the increase in fuel prices onto the passengers.
At the end of December 2016, IndiGo's total debt stood at Rs 2,746.6 crore and the entire amount is "aircraft related", as per the filing.
The carrier's total cash balance was Rs 8,455 crore, including free cash to the tune of Rs 3,786.5 crore.
