Analyst Concall
InterGlobe Aviation eyes 20% on-yr rise in capacity Jan-Mar
This story was originally published at 20:17 IST on 24 January 2025
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--InterGlobe Aviation:Introduced 4 new international destinations in Oct-Dec
--CONTEXT: Comments by InterGlobe Aviation mgmt at post-earnings concall
--InterGlobe Aviation: Aim for 40 international destinations by FY25-end
--InterGlobe Aviation: Hedging currency to nullify rupee volatility impact
--InterGlobe Aviation: To launch business class on 10 major routes
--InterGlobe Aviation: Strengthening domestic ops, building on intl ops
MUMBAI – InterGlobe Aviation Ltd. said on Friday that it plans to increase its capacity by 20% in the March quarter compared to the same period last year. It remained firm on the full-year guidance of early double-digit capacity addition, the management said in a post-earning conference call. The company said it expects to post an early single-digit moderation in the unit passenger revenue in Jan-Mar because of the significant constraints in aircraft supply last year.
In the December quarter, the company performed better than its guidance as demand came in stronger in the months of November and December. In both these months, the company achieved a load factor of more than 90%. Load factor measures how many seats in an airline are occupied by the passengers. In November, the airline achieved a record of 10 million customers in a single month. The company was 20,000 short of touching 11 million customers in December, the management said.
The company announced four new international destinations, taking its total international destinations to 38. The management aims for 40 international airports by the end of 2024-25 (Apr-Mar). The airline recently launched business-class tickets on the Delhi-Mumbai and Delhi-Bengaluru routes, and plans to start business class on the Delhi-Chennai route soon. In 2025, the company will launch business class tickets on 10 more metro-to-metro routes with a fleet of 45 aircraft.
The company's top line exceeded expectations in the December quarter, but profitability was adversely impacted by depreciation in the rupee, the management said. The rupee depreciated around 2% against the dollar in the December quarter compared to the previous quarter, which resulted in a mark-to-market foreign exchange loss of around INR 14 billion. The company's exposure to foreign exchange fluctuations as a significant portion of its lease liability and repayment obligations are denominated in dollars.
The management is hedging part of its foreign currency outflow to counter the exchange rate fluctuation. The company recorded a gain of INR 591 million on hedging contracts in the December quarter. Addition of more international capacity will act as a natural hedge against exchange rate fluctuations, the management said.
The airline is past its peak fleet grounding of mid-70s in the September quarter, and is currently operating in the 60s, the management said. Based on the guidance from original equipment manufacturers, the company expects groundings to be in the 40s and expects this number to go down further as the year progresses.
The company's current focus is on solidifying its foundation in the domestic market. The management does not think it's best for airlines to expand international operations while lacking a strong domestic base. The company is strengthening its domestic position and building its international operations on it, the management said.
The net profit of InterGlobe Aviation for the December quarter was INR 24.42 billion, 18.6% lower on year. Analysts had forecast a net profit of INR 29.97 billion for the company. However, excluding foreign exchange fluctuations, the company's profit after tax increased 26.1% on year to INR 38.46 billion. The company's revenue from operations for the December quarter was INR 221.11 billion, beating analysts' expectations of INR 216.68 billion. InterGlobe Aviation's top line increased 13.7% on year and 30.3% sequentially. On Friday, shares of the company closed 0.7% higher at INR 4,161.80 on the National Stock Exchange. The company announced its earnings after market hours. End
US$1 = INR 86.21
Reported by Akshay V. Johnson and Narayana Krishna
Edited by Tanima Banerjee
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