Thursday, July 30, 2020

On fare caps, layoffs and Air India: This is what IndiGo's senior management said during Q1 earnings call

IndiGo Chief Executive Officer (CEO) Ronojoy Dutta has come out strongly against capping fares and capacity, pushing the case for airlines to have a better say when it comes to deciding prices and utilization of the fleet.

Upon resuming domestic flights in May, the government had capped fares, which were limited within a specific range. Airlines were also asked to use only one-third of their capacity. This was further increased to 45 percent.
Addressing an analyst call after the country's largest airline announced its first-quarter results, Dutta admitted that the company needs to do a tough balancing act between reducing its wage bill, and keeping employee morale high. A lower wage bill is one of the critical parts of the airline's plan to reduce costs.
This is important as the airline incurred among its highest quarterly losses in the first three months of the financial year. It reported a net loss of Rs 2,844.3 crore for the quarter ended June 2020, as coronavirus-led lockdown impacted operations. Net profit in the same period last year stood at Rs 1,203.1 crore.

Dutta and his colleague Aditya Pande, the airline's Chief Financial Officer (CFO), commented on varying topics. Here's what they had to say.
Dutta said that the company plans to deploy 60-65 percent of its capacity in the third quarter of the financial year, "but subject to government lifting the cap.'

Though this may surprising, given that the airline CEO had recently said that capacity utilisation continued to hover around 30 percent despite the government raising the cap to 35 percent. Airlines needed more say in opening up more routes, Dutta said.

Similarly, he said it was important to remove the restriction in deciding fares. This will let airlines have the flexibility to determine fares according to demand, and other factors like flight timing and routes. "Let's not fares be dictated," Dutta said.

In the first quarter, IndiGo's passenger ticket revenues were Rs 585.4 crore, a decrease of 93.1 percent from a year ago.
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