January 27, 2020 / 10:48 AM / 2 months ago

IndiGo cuts capacity growth forecast for second straight quarter

BENGALURU/NEW DELHI (Reuters) - IndiGo, India’s biggest airline, cut its estimates for capacity growth for a second straight quarter on Monday, to rein in maintenance costs and improve aircraft utilisation amid a spate of groundings.

FILE PHOTO: The logo of IndiGo Airlines is pictured on passenger aircraft on the tarmac in Colomiers near Toulouse, France, July 10, 2018. REUTERS/Regis Duvignau

IndiGo has been forced to ground several of its Airbus A320neo planes fitted with Pratt & Whitey engines, which have been linked to in-flight engine shutdowns. The airline is in the process of replacing the engines in its affected fleet of over 100 planes.

Low aircraft utilisation and delivery delays from Airbus were the driving factors behind the cut, Chief Executive Officer Ronojoy Dutta told analysts during a post-earnings call, adding that IndiGo aimed to raise utilisation to about 13 hours a day from the current 12.2 hours.

The engine changes have also contributed to lower aircraft utilisation, Dutta said.

The airline’s owner, Interglobe Aviation Ltd, now expects capacity expansion for 2019-20 of 23%, down from its earlier forecast of 25%. In September, IndiGo had brought down its estimates from 30%, blaming a 3-4 month delay in aircraft deliveries by Airbus.

IndiGo’s profit rose to 4.90 billion rupees ($68.95 million), from 1.91 billion rupees a year ago, helped by cheaper fuel and higher unit revenue. Fuel typically accounts for almost a third of all airlines’ operating costs.

At IndiGo, those costs fell 2% to 33.42 billion rupees and revenue per available seat kilometer (RASK), a measure of profitability, rose 5.6% in the quarter.

However, total expenses surged 21.5% due to higher maintenance cost of its older A320ceo planes.

Interglobe said it expects the unit maintenance cost at IndiGo to improve starting fiscal 2021.

INTERNATIONAL GROWTH

Indigo, which dominates the domestic market and operates a large fleet of narrowbody, all economy-class aircraft, said it plans to deploy half its planes on international routes as growth from flights between major Indian cities comes under pressure due to aggressive competition.

“Overall strength in metro to metro markets is weak because of the new competition we are facing in these markets,” Dutta said.

In November, IndiGo signed a one-way codeshare agreement with Qatar Airways.

Earlier on Monday, India announced plans to sell its entire interest in Air India Ltd, making a renewed push after a failed attempt two years ago.

At that time, IndiGo had initially shown interest in the flag carrier’s international operations.

Dutta declined to comment on whether IndiGo would be interested in bidding for Air India.

Reporting by Chandini Monnappa in Bengaluru; Editing by Shailesh Kuber

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