INDIGO - InterGlobe Aviation Limited Share Price

Management Outlook and Major Points:

1. Financial Performance & Challenges:

• Q2 FY25 saw a net loss of Rs.10B due to peak aircraft groundings (mid-70s) and rising fuel costs. Seasonal demand shifts and competitive international markets added pressure.
• CASK ex-fuel ex-forex rose 23% YoY, driven by grounding mitigation, inflation, and higher airport charges. Fuel costs increased due to VAT hikes and congestion.

2. Growth Initiatives:

• Capacity Guidance: Full-year capacity growth remains on track at "early double digits." International capacity share targets 30% (currently 28%) with 3 new destinations planned by FY25-end.
• New Offerings: Launched business class on metro routes (40+ aircraft by 2025) and the BluChip loyalty program to boost customer retention.
• Digital & Ecosystem: Revamped app/website for direct bookings; IndiGo Ventures (Rs.3B fund) to invest in aviation startups.

3. Operational Updates:

• Aircraft Groundings: Peaked in Q2 (mid-70s), now moderating to high-60s. Expected to fall to sub-60 by CY24-end and ~40 by FY26. Mitigation costs (e.g., ACMI leases) will ease from H1 FY26.
• Infrastructure Constraints: Congestion at Delhi/Mumbai (40% of flights) impacts operations; collaborating with regulators for long-term solutions.

4. Demand & Revenue Trends:

• Domestic demand outperformed international (yield normalization). PRASK grew 2% YoY, with Q3 guidance indicating early-to-mid single-digit moderation.
• Ancillary revenue rose, driven by cargo and ancillary services.

5. Cost & Efficiency Measures:

• Addressing inflationary pressures (airport charges, crew accommodations) and fuel volatility. Block-time adjustments aim to mitigate weather disruptions.
• Liquidity remains strong (Rs.243.6B free cash; Rs.150B restricted cash).

6. Long-Term Vision:

• Focus on cost leadership, scaling international reach, and infrastructure readiness to support growth. Confidence in leveraging India's underpenetrated aviation market for sustained expansion.

Outlook: Management remains committed to long-term growth despite near-term headwinds, emphasizing fleet normalization, strategic investments, and operational resilience.

Question 1:
Question Text: Could you give a breakup of the 23% increase in CASK ex-fuel ex-forex between aircraft grounding costs and inflation? What is the normalized CASK? Are FY26's 40 grounded aircraft an average estimate?
Answer Summary: The 23% CASK increase was driven by AOG-related costs, expensive mitigation measures (damp/wet leases), and annual contractual inflation (e.g., airport charges). The 40 aircraft refers to expected grounded planes by FY26's start, down from mid-70s in Q2, with further reductions anticipated.

Question 2:
Question Text: Why was domestic RPK growth only 4% despite stable load factors? Will RPK accelerate as AOGs reduce?
Answer Summary: Demand normalized post-pandemic highs, impacted by seasonality, weather, and post-election travel shifts. Without AOGs, capacity would have been higher, but load factors remained stable. Long-term growth outlook is unchanged, with Q3 expected to rebound seasonally.

Question 3:
Question Text: Why is PRASK moderating in Q3 despite strong market share? Why did ancillary income rise sharply?
Answer Summary: PRASK moderation reflects increased international competition and capacity, offsetting strong domestic demand. Ancillary growth stemmed from cargo/freighter performance. Fuel-cost declines (linked to MOPAG) are partly offset by congestion-driven inefficiencies and VAT hikes.

Question 4:
Question Text: Have international load factors peaked due to competition? How are ATF trends impacting costs?
Answer Summary: International load factors (85% in Q1) remain strong, with new routes (e.g., Jaffna) driving growth. Competition is rising, but demand is robust. ATF prices dipped, but congestion increased fuel burn, and state VAT/OMC charges offset some gains.

Question 5:
Question Text: How is website/app revamp affecting direct bookings? Will IndiGo Ventures fund travel-tech startups?
Answer Summary: Direct bookings (~high teens% share) aim to enhance customer engagement. Loyalty programs (BluChip) and hotel bookings (early traction) align with long-term ecosystem growth. Ventures will target startups augmenting IndiGo's customer-centric services.

Question 6:
Question Text: Does loyalty program dilution or peak/non-peak pricing affect yields?
Answer Summary: Loyalty programs defer revenue but boost customer retention, supporting future yields. Pricing varies by demand (peak vs. non-peak), consistent with industry revenue-management practices.

Question 7:
Question Text: What are tax rate expectations? Will IndiGo invest in hotels or lobby against airport charges?
Answer Summary: Carry-forward losses (Rs.13,000 crore) negate tax liabilities except on finance income. Hotel investments are unlikely (core focus: aviation). Airport charges are regulator-moderated; dialogue balances costs with infrastructure needs for long-term growth.