BENGALURU/NEW DELHI (Reuters) - InterGlobe Aviation Ltd’s IndiGo has pushed back plans to own Airbus A320neo planes to preserve cash and will continue to lease them, its interim CEO said on Wednesday after the company posted its first quarterly loss since 2015.
Higher fuel prices and a weaker rupee have pushed up costs at Indian airlines including IndiGo, the largest domestic carrier by market share, while intense competition has limited its ability to raise fares, putting pressure on yields.
“At times when there is a little uncertainty we want to be prudent with cash, so right now we are holding off buying any A320s with cash and continuing to rely on sale and leaseback,” Rahul Bhatia said on an analyst call.
IndiGo already owns ATR planes using free cash and had plans to own some A320neo aircraft as well but has now put the decision on hold and will review it in future, Bhatia said.
India is the world’s fastest-growing aviation market but the surging fuel prices, weak currency and competition is putting pressure on airlines’ ability to make money despite 20 percent annual growth in domestic air traffic.
Full-service carriers such as state-owned Air India are surviving on government bailouts while Jet Airways Ltd is scrambling to raise money to stay afloat.
IndiGo has also put on hold plans to launch low-cost long haul flights and will increase its international presence using its existing fleet of A320neo aircraft. This is likely to help the airline that is looking at a 30 percent increase in passenger carrying capacity in the current fiscal year.
IndiGo is taking deliveries of aircraft from Airbus that were previously delayed because of problems with the engines manufactured by United Technologies’ Pratt & Whitney.
“Even if we have somewhat of a bubble in our capacity during these two quarters we are still comfortable with our long term capacity plans,” said the carrier’s senior adviser, Greg Taylor.
InterGlobe reported a loss of 6.52 billion rupees ($89.1 million) for the quarter ended Sept. 30 - its first since listing on the stock exchange in November 2015 - while revenue from operations rose 16.9 percent.
Total expenses soared 58.2 percent to 75.02 billion rupees, with aircraft fuel expenses surging 84.3 percent and foreign exchange losses widening over seven-fold.
IndiGo’s revenue per available seat kilometre fell 8.1 percent to 3.23 rupees during the quarter from a year ago while cost per available seat kilometre, excluding fuel, rose 13.5 percent.
“Indigo’s strength of a very strong balance sheet and execution capability continue to give them a structural advantage but competitive intensity which is likely to sharpen further has visibly impacted,” Kapil Kaul, CEO and director for South Asia at consultancy CAPA said.
Shares of the low cost carrier closed up 1.6 percent, while the broader market ended 0.8 percent higher.
($1 = 73.1850 Indian rupees)
Additional reporting by Tanvi Mehta in Bengaluru, Editing by Sherry Jacob-Phillips, Amrutha Gayathri and David Stamp