IndiGo set for a smoother takeoff after a rough September quarter
Subscribe to enjoy similar stories. InterGlobe Aviation Ltd’s shares lost about 7% on Monday after higher costs marred the airline's September quarter (Q2FY25) results, leading to a worse-than-estimated net loss of ₹990 crore. Naturally, the poor show has triggered a cut in earnings estimates for FY25 and FY26.
InterGlobe runs IndiGo, India’s largest airline. Jefferies India has trimmed its FY25 earnings per share estimates by 12% on Q2 miss, FY26-FY27 by 2% each. While the September quarter is seasonally weak, there were other headwinds too that hurt IndiGo.
The peak number of aircraft on the ground (AOG) in Q2FY25 meant costlier mitigation measures. Also, fuel cost per ASK (available seat kilometre) rose 4% owing to increased consumption due to changes in the fleet mix, an increase in VAT on aviation turbine fuel in some states and congestion at airports leading to higher block times. The good news is that IndiGo’s current grounded aircraft have reduced to the high-60s from the mid-70s levels seen in H1FY25.
The company anticipates that the groundings will continue to moderate to sub-60 level by 2024-end and to 40s by the start of FY26. “The impact on the profitability related to the costlier mitigation measures will also start to moderate downwards as we start returning the short-term damp leases sometime in the first half of next year," said the management in the earnings call. In Q2FY25, IndiGo’s capacity in terms of ASK was up 8% year-on-year.
It expects a rebound in passenger traffic in the seasonally strong Q3. It sees year-on-year capacity growth in early double-digits. IndiGo’s tailor-made business class offering will start in three weeks on the Delhi-Mumbai route.
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