IndiGo flags higher inflationary environment, escalation in fuel, airport costs

PTI, Jul 26, 2024, 7:47 PM IST

Representative image (source: PTI)

New Delhi: Leading airline IndiGo on Friday said it is experiencing a higher inflationary environment, with various expenses, including fuel costs and airport charges, going up.

The airline, which reported a 12 per cent fall in the June quarter profit due to cost escalation, is looking at ways to control costs.

During an earnings call with analysts to discuss the latest quarterly results, IndiGo Chief Financial Officer Gaurav Negi said there is an escalation in fuel prices as some states have started increasing the Value Added Tax (VAT) on jet fuel.

Airport charges have also started to climb upwards, and the airline is monitoring it as well as having discussions with airport partners. Further, maintenance works are going through a bit of an inflationary cycle, he said during an analyst’s call.

“Currently, we are experiencing a higher inflationary environment… it is across the board, we are experiencing, nonetheless, we are looking at ways on how to control the costs,” Negi said, adding that an increase in capacity is helping to offset higher costs.

The airline plans to induct six aircraft from Qatar Airways on damp lease in the coming quarters, subject to regulatory approvals.

At the end of June, IndiGo had 382 planes in its fleet.

For the current fiscal ending March 2025, the airline has a capacity guidance of early double digits, and for the second quarter, the capacity addition is anticipated to be in the high single digits.

InterGlobe Aviation, the parent of IndiGo, has reported a nearly 12 per cent decline in profit after tax at Rs 2,728.8 crore in the three months ended June due to higher fuel and other expenses.

Meanwhile, Negi said the grounded aircraft is in the mid-70s and expects the grounding to reduce towards the start of next year.

The airline has grounded planes due to the Pratt & Whitney (P&W) engine woes, and as part of mitigating measures, it has also taken planes on wet lease.

“We are working with P&W towards constant supply of spare engines, and basis the current estimates, we expect the grounding to start reducing towards the start of next year,” Negi said.

In the June quarter, IndiGo finalised an amendment to the existing agreement with P&W for customised compensation in relation to the grounding of aircraft due to spare engine unavailability.