India's largest airline IndiGo announced its second quarter results on Thursday. The low-cost carrier (LCC) reported net losses of Rs 1,062 crore on revenues of Rs 8,539.8 crore for the quarter. The airline said that losses were incurred on account of forex losses on operating lease liabilities and higher maintenance costs. This is a sharp swing from the previous quarter when the LCC reported highest-ever net profits (of Rs 1,203 crore) in its 13-year history.
Firstly, the IndiGo management deserves appreciation for successfully managing to keep the fight at the promoter level away from the investors' attention. In a nearly hour-long call, and with over a dozen analysts questioning the management on the quarterly results, not a single question was asked on the ongoing fight between the promoters - Rahul Bhatia and Rakesh Gangwal - which is surprising given that it's one of the most crucial issues at the airline.
The other major issue is that IndiGo is getting older, which is costing the airline a huge sum. For instance, the LCC reported higher maintenance cost of Rs 319 crore in the September quarter. This cost relates to the shop visits of its Airbus A320ceo aircraft. A320ceos are the older version of new generation A320neos. IndiGo's initial fleet was full of A320ceos, and the airline has started adding A320neos from March 2016 onwards. These A320ceos with IndiGo are now making second shop visits for maintenance. IndiGo's fleet of 245 aircraft includes 129 A320ceos, 89 A320neos, six A321neo and 21 ATRs. Due to A320ceos, the airline will keep incurring higher maintenance costs until 2022 until their strength in its fleet goes down considerably.
"A320ceos will start retiring from next year, and in higher volumes in 2022. The engines of these older aircraft are undergoing second shop visits, which are significantly more expensive than first shop visits. These second shop visits resulted in maintenance spikes in our costs," says IndiGo's CFO Aditya Pande.
25/10/19 Manu Kaushik/Business Today
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Firstly, the IndiGo management deserves appreciation for successfully managing to keep the fight at the promoter level away from the investors' attention. In a nearly hour-long call, and with over a dozen analysts questioning the management on the quarterly results, not a single question was asked on the ongoing fight between the promoters - Rahul Bhatia and Rakesh Gangwal - which is surprising given that it's one of the most crucial issues at the airline.
The other major issue is that IndiGo is getting older, which is costing the airline a huge sum. For instance, the LCC reported higher maintenance cost of Rs 319 crore in the September quarter. This cost relates to the shop visits of its Airbus A320ceo aircraft. A320ceos are the older version of new generation A320neos. IndiGo's initial fleet was full of A320ceos, and the airline has started adding A320neos from March 2016 onwards. These A320ceos with IndiGo are now making second shop visits for maintenance. IndiGo's fleet of 245 aircraft includes 129 A320ceos, 89 A320neos, six A321neo and 21 ATRs. Due to A320ceos, the airline will keep incurring higher maintenance costs until 2022 until their strength in its fleet goes down considerably.
"A320ceos will start retiring from next year, and in higher volumes in 2022. The engines of these older aircraft are undergoing second shop visits, which are significantly more expensive than first shop visits. These second shop visits resulted in maintenance spikes in our costs," says IndiGo's CFO Aditya Pande.
25/10/19 Manu Kaushik/Business Today
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