IndiGo continues profit run as rival airlines grapple with losses
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IndiGo continues profit run as rival airlines grapple with losses
Mumbai: IndiGo , India’s largest airline by passengers carried, reported a more than sixfold increase in profit to Rs. 787 crore for 2012-13—the low-fare airline’s fifth consecutive profitable year.
Revenue rose 65.4% to Rs.9,458 crore, according to data submitted to the Directorate General of Civil Aviation on Tuesday.
IndiGo’s run of profitability comes as India’s airline industry is estimated to have lost a combined $1.95 billion (around Rs.12,226 crore today) in 2012-13 on a revenue of $9.5 billion, according to consulting firm Centre for Asia Pacific Aviation, or Capa.
A combination of capacity deployment and yield management drove this profitability, IndiGo president Aditya Ghosh said in a phone interview.
The airline has increased its fleet capacity by 39% since last year, while the overall industry capacity shrunk by 4%, mainly because of the grounding of Kingfisher Airlines Ltd. IndiGo ended fiscal year 2012 with 55 aircraft, 2012-13 with 66 aircraft and now has 70 planes. It is likely to end the fiscal year with 75 planes.
Ghosh said IndiGo, run by InterGlobe Aviation Pvt. Ltd, deployed 28% of its capacity and handled 27% more passengers in 2012-13, while the overall industry’s passenger traffic fell by 5%.
“IndiGo continues to outperform on every single benchmark—customer ratings are high, service delivery is consistent with quality maintained, operating and financial measurements are best in the industry,” said Kapil Kaul, chief executive officer (South Asia) at Capa.
“Overall, IndiGo continues to focus on their business plan with strategic clarity and has demonstrated high execution ability; 70 aircraft in seven years and yet profitable for the last five-six years is remarkable,” he added.
In the quarter ended June, Indian airlines, excluding the grounded Kingfisher Airlines Ltd, lost nearly $200 million, though low-fare airlines posted small profits in the range of $40-50 million.
For the quarter ending 30 September, Capa in a mid-August report estimates industry losses to increase to $400-450 million because of the rising cost of operations that pushed up fares and kept away passengers.
State-run Air India Ltd would account for the largest share of the loss but, as the airline continues to be funded by the government, its overall financial performance has improved in the past year, Capa said.
IndiGo’s closest low-fare rival SpiceJet Ltd reported a loss of Rs.191 crore for 2012-13 compared with a loss of Rs.606 crore in 2011-12. Jet Airways (India) Ltd and its low-fare service JetKonnect together made a loss of Rs.779.80 crore last fiscal year.
The unlisted IndiGo, meanwhile, reported it had made a net profit of Rs.128 crore in 2011-12. Its earnings before interest, taxes, depreciation, amortization and rentals (Ebitdar) in the year ended March increased to Rs.1,758 crore, and its Ebitdar margin rose to 18.6%. The airline had the highest domestic market share in August at 29.1%.
The aviation ministry, however, told Parliament in December 2012 that IndiGo had made an operating loss of Rs.87.6 crore in 2011-12 on a revenue of Rs.55,52.4 crore and expenses of Rs.56,40.08 crore. IndiGo had said it “continues to generate healthy levels of profitability”, while the aviation ministry maintains its numbers on IndiGo.
Bharat Mahadevan, who until recently was regional manager for north-east Asia at Jet Airways, isn’t entirely convinced with IndiGo’s claim of profitability.
“There is no magic wand that IndiGo has that it shows profits while the others show losses, and since it’s not listed, one can’t say if it’s an exceptional one-off item” that pushed the airline to profits, Mahadevan said. “SpiceJet has reported a loss of Rs.191 crore for FY12-13, so it seems incredulous that IndiGo has reported a profit of Rs.787 crore.”
He, however, conceded that “IndiGo is a well-run airline that keeps its costs low, but since it is not listed, it’s tough to compare the profits versus the others.”
Capa estimates IndiGo must have reported Rs.300 crore from selling and leasing back planes to its revenue, adding “but these are only estimates”.
IndiGo had ordered 100 Airbus A320 aircraft in 2005 from Airbus SAS. The airline adds about a dozen aircraft each year to its fleet with this order. But many of these aircraft are sold to the lessors and leased back into the IndiGo fleet.
The funds generated by this, which is typically a few million dollars more than the price the airline would have paid for the aircraft in 2005 for a bulk order, is also booked into the airline’s profits, according to analysts.
With its fleet of 69 new Airbus A320 aircraft, IndiGo offers 434 daily flights connecting 34 destinations and five international destinations. Its first international flight commenced on 1 September, 2011.
Craig Jenks, president of Airline/Aircraft Projects Inc., a New York-based air transport consulting and advisory services firm, said globally the quality, dedication, team work and focus of airline management is a key variable.
“Yes, of course, in India as elsewhere, you look at and complain about fuel cost, red-tape, the macroeconomic drivers… All these factors (are) “outside our control”. But there are always some factors within management control... A good management can make a difference,” Jenks said.
Ghosh said IndiGo’s fundamental objective is to stay focused in keeping costs low and the staff engaged, and offering passengers on-time and better services that rival airlines.
“But what is dampening is that the ultimate cost of travel is going up because of high airport charges and taxation. These charges are ultimately transferred to the passengers,” he added.
With the government allowing more overseas investment in Indian airlines, IndiGo faces competition from foreign airlines that could bring in higher operating standards.
While Jet Airways has agreed to sell a 24% stake to Abu Dhabi-based Etihad Airways PJSC, Tata Sons Ltd is entering into a joint venture with Malaysia’s AirAsia Bhd to launch a domestic low-fare airline as well as teaming up with Singapore Airlines Ltd for a full-service airline.
“I am not unduly worried. I am not losing sleep” over these, Ghosh said, adding that IndiGo was not looking for foreign investment. “We have healthy cash-flow position. Moreover, we are debt free and we have no working capital loans.”
Tarun Shukla in New Delhi contributed to this story.
IndiGo continues profit run as rival airlines grapple with losses - Livemint
Revenue rose 65.4% to Rs.9,458 crore, according to data submitted to the Directorate General of Civil Aviation on Tuesday.
IndiGo’s run of profitability comes as India’s airline industry is estimated to have lost a combined $1.95 billion (around Rs.12,226 crore today) in 2012-13 on a revenue of $9.5 billion, according to consulting firm Centre for Asia Pacific Aviation, or Capa.
A combination of capacity deployment and yield management drove this profitability, IndiGo president Aditya Ghosh said in a phone interview.
The airline has increased its fleet capacity by 39% since last year, while the overall industry capacity shrunk by 4%, mainly because of the grounding of Kingfisher Airlines Ltd. IndiGo ended fiscal year 2012 with 55 aircraft, 2012-13 with 66 aircraft and now has 70 planes. It is likely to end the fiscal year with 75 planes.
Ghosh said IndiGo, run by InterGlobe Aviation Pvt. Ltd, deployed 28% of its capacity and handled 27% more passengers in 2012-13, while the overall industry’s passenger traffic fell by 5%.
“IndiGo continues to outperform on every single benchmark—customer ratings are high, service delivery is consistent with quality maintained, operating and financial measurements are best in the industry,” said Kapil Kaul, chief executive officer (South Asia) at Capa.
“Overall, IndiGo continues to focus on their business plan with strategic clarity and has demonstrated high execution ability; 70 aircraft in seven years and yet profitable for the last five-six years is remarkable,” he added.
In the quarter ended June, Indian airlines, excluding the grounded Kingfisher Airlines Ltd, lost nearly $200 million, though low-fare airlines posted small profits in the range of $40-50 million.
For the quarter ending 30 September, Capa in a mid-August report estimates industry losses to increase to $400-450 million because of the rising cost of operations that pushed up fares and kept away passengers.
State-run Air India Ltd would account for the largest share of the loss but, as the airline continues to be funded by the government, its overall financial performance has improved in the past year, Capa said.
IndiGo’s closest low-fare rival SpiceJet Ltd reported a loss of Rs.191 crore for 2012-13 compared with a loss of Rs.606 crore in 2011-12. Jet Airways (India) Ltd and its low-fare service JetKonnect together made a loss of Rs.779.80 crore last fiscal year.
The unlisted IndiGo, meanwhile, reported it had made a net profit of Rs.128 crore in 2011-12. Its earnings before interest, taxes, depreciation, amortization and rentals (Ebitdar) in the year ended March increased to Rs.1,758 crore, and its Ebitdar margin rose to 18.6%. The airline had the highest domestic market share in August at 29.1%.
The aviation ministry, however, told Parliament in December 2012 that IndiGo had made an operating loss of Rs.87.6 crore in 2011-12 on a revenue of Rs.55,52.4 crore and expenses of Rs.56,40.08 crore. IndiGo had said it “continues to generate healthy levels of profitability”, while the aviation ministry maintains its numbers on IndiGo.
Bharat Mahadevan, who until recently was regional manager for north-east Asia at Jet Airways, isn’t entirely convinced with IndiGo’s claim of profitability.
“There is no magic wand that IndiGo has that it shows profits while the others show losses, and since it’s not listed, one can’t say if it’s an exceptional one-off item” that pushed the airline to profits, Mahadevan said. “SpiceJet has reported a loss of Rs.191 crore for FY12-13, so it seems incredulous that IndiGo has reported a profit of Rs.787 crore.”
He, however, conceded that “IndiGo is a well-run airline that keeps its costs low, but since it is not listed, it’s tough to compare the profits versus the others.”
Capa estimates IndiGo must have reported Rs.300 crore from selling and leasing back planes to its revenue, adding “but these are only estimates”.
IndiGo had ordered 100 Airbus A320 aircraft in 2005 from Airbus SAS. The airline adds about a dozen aircraft each year to its fleet with this order. But many of these aircraft are sold to the lessors and leased back into the IndiGo fleet.
The funds generated by this, which is typically a few million dollars more than the price the airline would have paid for the aircraft in 2005 for a bulk order, is also booked into the airline’s profits, according to analysts.
With its fleet of 69 new Airbus A320 aircraft, IndiGo offers 434 daily flights connecting 34 destinations and five international destinations. Its first international flight commenced on 1 September, 2011.
Craig Jenks, president of Airline/Aircraft Projects Inc., a New York-based air transport consulting and advisory services firm, said globally the quality, dedication, team work and focus of airline management is a key variable.
“Yes, of course, in India as elsewhere, you look at and complain about fuel cost, red-tape, the macroeconomic drivers… All these factors (are) “outside our control”. But there are always some factors within management control... A good management can make a difference,” Jenks said.
Ghosh said IndiGo’s fundamental objective is to stay focused in keeping costs low and the staff engaged, and offering passengers on-time and better services that rival airlines.
“But what is dampening is that the ultimate cost of travel is going up because of high airport charges and taxation. These charges are ultimately transferred to the passengers,” he added.
With the government allowing more overseas investment in Indian airlines, IndiGo faces competition from foreign airlines that could bring in higher operating standards.
While Jet Airways has agreed to sell a 24% stake to Abu Dhabi-based Etihad Airways PJSC, Tata Sons Ltd is entering into a joint venture with Malaysia’s AirAsia Bhd to launch a domestic low-fare airline as well as teaming up with Singapore Airlines Ltd for a full-service airline.
“I am not unduly worried. I am not losing sleep” over these, Ghosh said, adding that IndiGo was not looking for foreign investment. “We have healthy cash-flow position. Moreover, we are debt free and we have no working capital loans.”
Tarun Shukla in New Delhi contributed to this story.
IndiGo continues profit run as rival airlines grapple with losses - Livemint
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An interview with Mr. Ghosh
Eyeing double digit growth in FY14; no IPO plans: Indigo - Moneycontrol.com
Eyeing double digit growth in FY14; no IPO plans: Indigo - Moneycontrol.com
