Finally: IndiGo reports rising airfare after year of declines


Finally: IndiGo reports rising airfare after year of declines
IndiGo controls 41.5 per cent of India's domestic market but carries 6 per cent of the country's international passengers.

New Delhi/Bengaluru - Optimism comes after major carriers swing to loss in July-September period

By Reuters

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Published: Thu 24 Jan 2019, 6:52 PM

Last updated: Thu 24 Jan 2019, 8:54 PM

The owner of India's biggest airline by market share, IndiGo, reported a rise in airfare in November, December and stretching into January after suffering a year of decline, and said it would boost growth with the expansion of international services.
Investors welcomed the news, with InterGlobe Aviation shares rising as much as 5 per cent to their highest in three weeks.
The optimism comes after major carriers swung to a loss in July-September as high oil prices, a weak rupee and domestic price competition eroded margins, leaving IndiGo's debt-laden rival Jet Airways struggling to stay in the air. For InterGlobe, the September quarter marked its first loss since debuting on the stock exchange in 2015.
InterGlobe on Wednesday returned to profit in October-December, albeit a 75 per cent fall from the same period a year earlier to Rs1.91 billion ($26.80 million) due to higher costs.
Morgan Stanley analysts said the profit missed their estimate due to lower passenger volume, but that a rise in passenger yield - a proxy for airfare - was a larger positive for investors.
IndiGo's passenger yield rose for the first time since the end of 2017, with a busy festive period pushing the yield up by 3.7 per cent in October-December versus a year prior. In the September quarter, the yield fell 9.7 per cent.
"For the time being, the better environment that we had in November and December has continued so far," chief commercial officer Willy Boulter said on an analyst call. "We see there is some discipline in imposing advance purchase requirements."
IndiGo last year said fares were down in part because rivals were not charging the usual premium for last-minute bookings. Its load factor, a measure of seats filled, fell 3.2 percentage points to 85.3 per cent. Chief financial officer Rohit Philip said fare hikes in November and December offset that decline, making it the "right trade-off".
Kotak Institutional Equities analyst Garima Mishra said the December quarter performance was stronger than expected. "We believe the worst in terms of yield pressure and fuel costs is behind," she said in a note to clients.
International expansion
Low-cost carrier IndiGo, which took delivery of 55 aircraft in 2018, controls 41.5 per cent of India's domestic market but carries 6 per cent of the country's international passengers. It expects to expand passenger-carrying capacity by 34 per cent in January-March, almost a third of which will come from overseas routes using longer-range Airbus SE A321neo planes which have a higher seating capacity, said interim CEO Rahul Bhatia.
"In the past, we have focused on setting up the right network domestically. Now with this in place we are looking to strengthen our international presence," Bhatia said. IndiGo will begin direct flights to Istanbul in March and add destinations.
The carrier also plans to use A321neo planes on busy domestic routes, especially flights to and from congested airports such as Mumbai where new slots are difficult to secure.
InterGlobe chief operating officer Wolfgang Prock-Schauer also said IndiGo, which operates 208 planes, including 66 A320neos, does not expect issues with the A320neos' Pratt & Whitney engines to affect international expansion.
IndiGo has been forced to ground its A320neo aircraft on several occasions due to issues with the engines. India's air safety watchdog last week ordered extra checks on the aircraft which IndiGo is carrying out, Prock-Schauer said.

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