IndiGo reports net loss of Rs 987 crore in Q2FY25 due to high fuel costs

Aircraft groundings peaked to 'mid-70s' but situation is easing

Missing Street estimates, India’s largest airline IndiGo posted a consolidated net loss of Rs 986.7 crore for the second quarter of the 2024-25 financial year, driven by rising fuel costs, increased airport charges, higher aircraft lease expenses, grounded planes, seasonal downturn, and lower yields in the international market.

 

This loss marks the first time in seven quarters that IndiGo has slipped into the red, with the airline last reporting a net loss of Rs 1,583.3 crore in the second quarter of 2022-23.

 

A Bloomberg survey of brokerages had forecast an average profit of Rs 134 crore for a quarter that usually sees seasonally tepid demand.

 

 

IndiGo’s Chief Financial Officer, Gaurav Negi, in a call with investors, noted that aircraft groundings peaked in the “mid-70s” during the September quarter, although these numbers are beginning to decline, with grounded planes expected to drop to the “up-60s (between 60 and 65)” by the end of 2024, and further to the “40s” by early next financial year. 

 

This, Negi said, is based “our current discussion with the original equipment manufacturer (Pratt & Whitney, or PW)”, whose engines are a primary cause of the ongoing disruptions.

 

PW flagged a potential defect in its engines in September 2023, leading to additional groundings as safety inspections were carried out. The discovery of powder metal issues prompted IndiGo to ground about 35 aircraft for PW’s detailed checks. Prior to this, around 40 of IndiGo’s aircraft were grounded due to an older problem with PW engines’ geared turbofan.

 

To offset capacity shortages, IndiGo has leased planes from external sources, including Boeing 737s from Qatar Airways, though this has raised “other costs” significantly.

 

“Other costs, which are not related to fuel or foreign exchange issues, have increased largely due to groundings and the mitigation-related costs (lease costs). The annual contractual charges at airports have also increased, driven by the new control periods (set by the Airports Economic Regulatory Authority),” Negi said.

 

Fuel-related expenses have also risen sharply, climbing 12.8 per cent year-on-year to Rs 6,605.2 crore, attributed to factors such as heightened value-added tax on aviation turbine fuel (ATF) in certain states, changes in IndiGo’s fleet mix, and intensifying airport congestion at major hubs.

 

Chief Executive Pieter Elbers highlighted infrastructure challenges, noting that congestion in key locations like Delhi and Mumbai is a significant hurdle. “While a lot of effort is being made to make sure that the infrastructure is being ramped up, the infrastructure at major locations, such as Delhi and Mumbai, will take time to match this growth. This will have an impact on the operational performance of airlines, as well as their ability to increase capacity at these airports."

 

The runway at Mumbai’s airport, for instance, has reached its operational capacity. Only one part of Delhi’s Terminal 1 has resumed handling flight (in September) as it is still under refurbishment following a roof collapse in June that killed one person.

 

Negi pointed out that while revenue from the domestic market, which makes up over three-quarters of IndiGo’s passenger income, grew more than the international market, yields from which moderated vis-à-vis last year.

 

Elbers noted that IndiGo is witnessing increased competition internationally as “India has become a very lucrative market for people.”

 

IndiGo remains focused on its international expansion, with plans to add three destinations by the financial year’s end, bringing its total to 40. “The share of international capacity (in terms of available seat kilometers) would then reach 30 per cent,” the CEO noted. 

 

While the September quarter is generally weak for the airlines, the airline's long-term view of the Indian aviation market remains strong, Elbers added.