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IndiGo on Thursday posted a consolidated net profit of Rs 1,894.5 crore for the fourth quarter of 2023-24 (FY24), registering 106.2 per cent growth year-on-year (Y-o-Y) amid high demand for air travel.
Also, the low-cost airline announced a shift in its business model, with plans to introduce a business class on “busiest and business routes” by the end of this year. As on March 31, 2024, IndiGo operated 367 aircraft serving 88 domestic and 30 international destinations, all of which were economy class.
In a conference call with analysts, Chief Executive Officer (CEO) Pieter Elbers said that more details about the business class offering would be announced in August, coinciding with the airline’s 18th anniversary.
He mentioned that the business class product would be “very IndiGo-like” in terms of creating a unique structure in the aviation market.
“India is changing rapidly and the needs of the Indian consumers are changing rapidly. We have seen that happening over the past couple of years. Against that backdrop and looking at the network with IndiGo, wherein there are a lot of high-frequency routes with a lot of business-related travel, we felt collectively that this was the right moment to move into that space. This is a natural evolution,” he further said.
About 27 per cent of IndiGo’s total passenger carrying capacity currently operates on its international routes. The airline's plans to introduce a business class offering were hinted at last month when it placed an order with European planemaker Airbus for 30 A350-900 widebody aircraft. These aircraft, with their larger fuel tanks, are suitable for long-haul routes, such as those connecting India to North America and Europe.
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However, the delivery of the A350-900 widebody jets is not expected to commence until 2027. In contrast, IndiGo is set to receive its first batch of the A321XLR aircraft – narrowbody planes with a longer range than the A321neo – as early as next year. As a result, the airline’s initial business class is expected to be on an A320neo or A321neo aircraft.
In FY24, IndiGo carried 106.7 million passengers, marking 24.7 per cent Y-o-Y growth, the airline announced. Consequently, its annual consolidated net profit reached Rs 8,157 crore in FY24, a significant turnaround from a consolidated net loss of Rs 2,980 crore in FY23.
In the fourth quarter of FY24, IndiGo witnessed a substantial 22.3 per cent Y-o-Y increase in total cost, amounting to Rs 16,734 crore. Nonetheless, the airline’s total revenue soared even higher, growing 26.2 per cent Y-o-Y to Rs 18,505 crore.
During this period, IndiGo carried 26.7 million passengers, marking a 14 per cent Y-o-Y surge in traffic.
The rise in the airline’s total cost for Q4 was primarily due to increasing non-fuel expenses, such as aircraft maintenance, airport fees, and employee costs, according to IndiGo Chief Financial Officer Gaurav Negi. Fuel costs account for about 40 per cent of an airline's total expense.
The increase in aircraft maintenance expenses and airport fees could be linked to the fact that approximately 75 of the airline’s planes are currently grounded due to issues with Pratt & Whitney engines.
When asked about the outlook for these grounded aircraft, Negi said: “The number of grounded aircraft is in the mid-70s. We are not anticipating anything significantly adverse...We are not expecting anything that would be significantly different from the current situation.”
ALSO READ: IndiGo plans to expand regional network with order of 100 smaller planes
ALSO READ: IndiGo plans to expand regional network with order of 100 smaller planes
Negi added that the aircraft lease extensions and additions of new aircraft have significantly mitigated the situation. However, while the airline’s passenger capacity or ASK growth was 21.8 per cent in FY24, the airline is expecting a capacity rise of “early double digits (10-15 per cent)” in FY25.
ASK (available seat kilometres) is a measure of an airline’s passenger carrying capacity, representing total number of seats available for sale multiplied by the distance flown.
