India’s largest domestic airline Indigo, continued to impress with its fourth quarter fiscal 2016 and full year fiscal 2016 earnings reported last Friday.
For the full financial year ending March 2016, Indigo reported:
- Revenues of Rs 16,601 crore
- Net profit of Rs 1,990 crore for FY16 (53% increase YOY)
- Cash on hand: Rs 6,046 crores (Rs 2,262 free cash, balance restricted)
- Aircraft related debt: Rs 3,200 crores
- Seat capacity increase: 21%
- Passengers 33 million
- Fare decline 13%
While results were driven by lower fuel prices and soaring demand, what Indigo has done extremely well is profitable induction of capacity. In spite of declining yields it has managed to drive revenue increases via innovative methods, strong ancillary revenues and network growth.
For the fourth quarter of fiscal 2016, numbers were as below:
- Revenue: Rs 4,247.5 crores
- Expenses: Rs 3,409.8 crores
- Net profit Rs 579 crores (0.3% increase)
- Market share 38.4%
Overall a great result. Yet there are a few items of caution. As mentioned on the earnings call, the Pratt and Whitney PW1100G engines powering the new Airbus A320neo’s continue to be a challenge due to performance which is coming in at 13% versus the target of 15% . Though, this may work out to Indigo’s benefit depending on how well the airline negotiates the compensation package.
As the A320neo sub-fleet grows, the impact of the start time issues on overall network will also grow, which as of now can be managed with the buffers within the network.
Additionally, Indigo has been on a hiring spree and employee and benefit costs are set to increase.
On the fleet financing side, with 35 aircraft already financed, the sale and leaseback model continues to generate a steady stream of revenue.
A detailed analysis will follow. Stay tuned.