IndiGo Posts Rs 2,582 Crore Net Loss in September Quarter Despite Revenue Growth

InterGlobe Aviation Limited, operating as IndiGo, has announced a substantial net loss of Rs 2,582 crore for the quarter ending September 30, 2023. This marks a significant downturn compared to the Rs 2,176 crore profit recorded in the June quarter. The loss widened compared to the same period last year, which saw a loss of Rs 987 crore.

Despite a healthy 9% year-on-year rise in total revenue to Rs 18,555 crore, driven by an 11.2% increase in passenger ticket revenues and a 14% rise in ancillary revenues, the airline’s profitability was severely impacted by foreign exchange fluctuations. These currency movements affect costs such as aircraft leases, maintenance, and fuel, which are largely settled in US dollars. A weaker Indian Rupee makes these dollar-denominated expenses more expensive in rupee terms.

IndiGo stated that if not for the foreign exchange impact, the company would have achieved a net profit of Rs 104 crore. The airline's EBITDAR (Earnings Before Interest, Taxes, Depreciation, Amortisation, and Rent) more than halved to Rs 1,114 crore from Rs 2,434 crore a year ago, reflecting increased cost pressures. Total expenses surged by 18% year-on-year to Rs 22,081 crore, primarily due to higher maintenance, airport, and staff costs. While fuel expenses decreased by 10%, the cost per available seat kilometre (CASK) rose by 10%, and excluding fuel, CASK jumped by 25%, indicating significant cost inflation in non-fuel components.

Passenger yields improved by 3.2%, and revenue per available seat kilometre (RASK) rose by 2.3%. However, these gains were insufficient to offset the increased costs and forex impact. CEO Pieter Elbers highlighted the importance of optimizing capacity during seasonally weaker periods to sustain profitability and noted the airline's strong operational performance.

Impact This news significantly impacts the Indian stock market by affecting investor sentiment towards the aviation sector. IndiGo's large loss, driven by external factors like forex, could make investors cautious about other companies with similar cost structures. The company's stock price reacted negatively, indicating a direct impact on shareholder value. Rating: 7/10

Difficult Terms: Forex Fluctuations: Changes in the exchange rate between currencies, such as the Indian Rupee and the US Dollar. When the Rupee weakens, it takes more Rupees to buy the same amount of Dollars, increasing costs for companies paying in USD. EBITDAR: Earnings Before Interest, Taxes, Depreciation, Amortisation, and Rent. A measure of a company's operating performance before considering financing, accounting, and rental costs. CASK: Cost Per Available Seat Kilometre. A metric used in the airline industry to measure operating costs relative to capacity. A higher CASK indicates higher costs per unit of capacity. RASK: Revenue Per Available Seat Kilometre. A metric used to measure revenue generated per unit of capacity. A higher RASK generally indicates better revenue generation.