IndiGo is an anomaly in the Indian market – it is the only profitable domestic airline this financial year (ending 31-Mar-2012). The carrier is however, like its peers, feeling the pressure in a tough operating environment. President Aditya Ghosh this month noted the carrier would see a decline in FY2012 profits, with the results substantially impacted by high fuel costs.
"Margins were under huge pressure because average price of fuel is now higher than what it was in 2009. There has been a growth in revenue and we will turn out to be profitable at end of the year. It will be much smaller profit than we have done in the previous year,'' he said in an interview with Business Standard. The carrier reported an 18% increase in profit to INR6.5 billion (USD130 million) in FY2011 but expects the FY2012 result to be a "fraction" of this figure. "For us profitability means that we are able to get spare parts on time, pay salaries on time, maintain integrity of schedules and plan for growth," he stated.
IndiGo co-founder Rahul Bhatia confirmed the LCC "will end the year making money". He also dismissed comments made by Kingfisher Airlines chairman Vijay Mallya that the only profitable airlines in the Indian market are the ones conducting sale-and-lease back transactions. "Saying that all of our money comes from sale and leasebacks is silly," Mr Bhatia said, adding: "If sale and leaseback is the only formula to profitability, I don't think we have the IP rights on this and everybody can do it and I think everybody does it."
As confirmed by India's Minister of Civil Aviation, Ajit Singh on 22-Mar-2012, all scheduled Indian airlines except IndiGo are incurring losses, based on returns filed by airlines with the Directorate General of Civil Aviation (DGCA). Mr Singh noted the industry has reported INR260 billion (USD5.1 billion) of operational losses in the 2007-2010 period, with an INR100 billion (USD2.0 billion) loss anticipated in 2011/12.
29/03/12 CAPA Centre For Aviation
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