IndiGo posts Rs 1,062 cr Q2 loss

Budget carrier IndiGo's parent InterGlobe Aviation on Thursday reported widening of its net loss to Rs 1,062 crore for the September quarter, hit by higher costs related to operating lease liabilities.

The company had a net loss of Rs 651.5 crore in the corresponding period a year ago.

According to a release, InterGlobe Aviation's total income rose 31 per cent to Rs 8,539.8 crore in the second quarter of the current fiscal.

In the year-ago period, the same stood at Rs 6,514.1 crore.

IndiGo Chief Executive Office Ronojoy Dutta said that while revenue performance was much better during the September quarter, the losses were accentuated by forex losses on operating lease liabilities created under Ind AS 116, and re-assessment of accrual estimates for future maintenance cost.

Indian Accounting Standard 116 or Ind AS 116 has come into effect from April 1 and pertains to principles for recognition, presentation and disclosure of leases.

The standard would have a significant impact on various industries such as airlines, where aircraft operated are mostly on lease.

The loss before tax stood at Rs 1,031.8 crore in the latest September quarter where it was Rs 987.2 crore in the year-ago period.

"Mark-to-market losses on capitalised operating leases of Rs 4,282 million and higher maintenance cost of Rs 3,190 million significantly impacted profitability," the company said.

During the September quarter, yield or average fare paid per passenger increased by 9.4 per cent.

Total cost jumped nearly 28 per cent to Rs 9,571.6 crore in the three months ended September.

"We remain focused on our growth plans and are expanding both domestically and internationally," Dutta said.

IndiGo is the country's largest airline in terms of domestic market share.

At the end of September, IndiGo had a total cash balance of Rs 18,736.2 crore, including Rs 8,706.3 crore of free cash.

The total debt, including the capitalised lease liability, stood at Rs 19,841.8 crore.

"Post servicing of debt and lease obligations, IndiGo generated Rs 33,340 million through its operating activities for the half year ended September 2019," the release said.

During the earnings call, Dutta, the market is softening and that it was forecasting a flat unit revenue year-over-year.

"July and August were good strong months, we were confident of what was going on. In September, we started seeing some weakening. September was always weak and it was difficult to separate seasonal weakness from any economic weakness," he said.

About aircraft deliveries, he said the delays are beyond the airline's control and asserted that it was not pushing back the deliveries.

"We are hungry for more aeroplanes and we have lot of routes we would like to fly. We are after Airbus... Unfortunately, all across the aviation industry worldwide there seems to be problem with supply chain... people talk of castings, forgings and that those things are not available.

"All engine manufacturers, all aircraft manufacturers seem to be struggling in keeping up with the demand," Dutta noted.

To a query about the airline's interest in Air India's international operations, Dutta said those are all great questions for which it does not have definitive answers.

"They are all subject matter of great interest. So, we talk about it in various management forums and we do not have something to declare or announce as a yes or no. We recognise that we are at a point of evolution where we have to think about longer range aircraft but beyond that, I don't have much to share at this point," he said.

The government is working on the final contours for the disinvestment of loss-making Air India.

The airline had a fleet of 245 planes, including 129 A320 ceos, 89 A320 neos, 6 A321 neos and 21 ATRs. It had services to 77 destinations, including 19 international ones, at the end of September.

Shares of InterGlobe Aviation rose nearly one per cent to close at Rs 1,668 apiece on the BSE.

Meanwhile, IndiGo promoters -- Rahul Bhatia and Rakesh Gangwal -- are at loggerheads on differences over certain issues. The feud came into the public in July when Gangwal had sought Sebi's intervention in alleged corporate governance lapses at the company.

On October 1, Bhatia and his group InterGlobe Enterprises sought arbitration proceedings in London.

In deepening rift between the two, who were long time friends, Bhatia has also filed petitions in US courts seeking evidence from Gangwal and InterGlobe Aviation's independent director Anupam Khanna for the arbitration proceedings.