Indian low-cost carrier IndiGo announced another quarterly loss for Q2 of 2021 as costs remain high. However, the net loss of ₹1,457 crores ($194.3mn) was offset by the carrier doubling its revenue compared to the same time last year. With government restrictions on capacity gone, IndiGo could be looking to finally bounce back from its losses.
Several non-pandemic factors are also pushing IndiGo further into the red, with fuel prices a major concern. Photo: Getty Images
IndiGo reported its financials for the second fiscal quarter (July-September) last week. The period saw the carrier increase its revenues two-fold to ₹5,608.5 crores ($748mn) compared to the same time last year. This was also an impressive rebound from Q1 revenue, which was severely hurt by India’s disastrous second wave.
Net loss for the quarter stood at ₹1,457 crores ($194.3mn), over 55% than Q1 but up 17% compared to the same time in 2020. The loss might come as a surprise given the revenue gains, but there are some costs that set back the airline’s recovery.
IndiGo has been aggressive with capacity deployment and opening new regional hubs to boost cash flow. Photo: Getty images
In a statement about the results, CEO Ronojoy Dutta said,
“We are encouraged by the pace of revenue recovery. We continue to work towards return to profitability in order to strengthen our balance sheet. With a modern fleet, dedicated employees and a stronger economic environment we are well positioned to leverage all the growth opportunities around us.”
The biggest cost increase was seen in fuel. As the price of aviation fuel has soared in recent months, IndiGo has been hit by a huge cost increase. The airline saw its fuel bill go up 208% compared to 2020, in line with a 78% capacity increase. The ₹1989 crore ($265.2mn) price for gas ate substantially into revenues for the quarter.
Other expenses also rose as IndiGo restored salaries, added new aircraft, and returned employees to work. With non-fuel expenses also up 46%, IndiGo focused on flying as much as possible in the quarter gone by and securing a higher market share.
IndiGo’s relatively strong financial footing allowed it to increase its market share after a challenging summer for others. Photo: Getty Images
With the price of fuel showing no signs of slowing, investor confidence in IndiGo has been hit. However, there is good news on the horizon, one that could perhaps send the carrier into the black during this financial year.
In mid-October, the Indian government did away with capacity limits for airlines, allowing them to fly their full schedule. This move came 10 months after initially being planned and will be a huge boost to IndiGo in particular. With new routes being added every week and enough capacity to sustain robust domestic operations, revenue will be on the up-and-up next quarter.
For now, observers will be keen to see how IndiGo performs in the third quarter. If the current COVID recovery continues, the airline could be eying a full recovery by early next year. However, with new competitors looming and fuel prices a big concern, nothing is for sure just yet.
What do you think about IndiGo’s financial results? Let us know in the comments!
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