News
A320neo delay weighs heavily on IndiGo
January 29th 2016
InterGlobe Aviation, the parent company of Gurgaon-headquartered IndiGo Airlines, which made a stellar market debut in November, has reported disappointing numbers for the nine month period to December 31. The results were driven by an decline of more than 80% in net profit in the seasonally weak July-September quarter and higher employee and aircraft leasing costs. Read More »
However, the LCC posted a near 24% boost in third quarter profit, to 6.57 billion rupees ($97 million), from 5.31 billion rupees a year ago and revenue rose almost 12%, to 44.07 billion rupees.
"IndiGo continues to benefit from the favourable oil price environment, but the pressure on passenger yields and a five per cent depreciation in the currency offset part of this benefit," Michael Beer, an analyst with Citi Research said in a note.
Airbus' delayed delivery of the A320neo weighed heavily on IndiGo’s results. In a post-earnings conference call with analysts, the airline said it would be difficult to hit its 111 aircraft target by March 2016, disappointing investors, particularly after hiring a significant number of pilots and operational staff to meet its incoming neo fleet in the quarter. To deal with the shortfall, IndiGo said it has signed short-term lease agreements for 22 aircraft. IndiGo is by far the largest customer for the neo, with 430 of the type on order.
The announcement sent IndiGo’s stock down 20% last Friday, its worst intraday decline yet. The sharp drop, which prompted a halt in trading, also took its peers, Jet Airways and SpiceJet, down 14% and 15%, respectively.
At SpiceJet, the revived LCC recorded its highest ever quarterly profit in the September-December period, with a net gain of 238 crore rupees ($35 million). It was its fourth consecutive profitable quarter after it almost went out of business just over a year ago. Costs during the period decreased 35%, it said.
“SpiceJet was back to near normal operations this quarter. While the margins remain slightly depressed due to wet lease operations, the Chennai floods and exchange losses, we are happy with the progress we have made so far,” said SpiceJet chairman, Ajay Singh. In November, Singh said he was in talks with Airbus, Boeing, and Bombardier for a major aircraft order in excess of 100 frames to be posted this year.
From February 10, SpiceJet will launch services from Jaipur and Hyderabad to Dubai. It will then serve Dubai from ten cities in India. "Dubai is SpiceJet's key international market," said Singh. "We will continue to increase our presence there. Our customers can expect many more flights.”
At Vistara, CEO Phee Teik Yeoh, last week confirmed a cabin reconfiguration for the carrier’s A320 fleet. “We have learnt over the past year of operations that business class seats did not take off the way we expected. Because of the route dispersal guidelines, we have to fly some non-profitable routes. We will reduce the premium category seats. We have shown we can sell economy-class seats better than other airlines. Very soon, our load factor in economy class will exceed the market average,” the Vistara chief told the Business Standard. Vistara has business, premium economy and economy seating.
