IndiGo profits down 7.4% for Q1 due to “competitive fare pressures”

Despite IndiGo’s reported increase in operational revenue of 8.7% compared to the same quarter last year, the figure of INR45.8 billion for Q1 2017 has resulted in a net profit of only INR5.29 billion, a drop of 7.4% compared to Q1 2016. Aditaya Ghosh, IndiGo president, confirmed that profitability had fallen “primarily because of competitive fare pressures,” adding “we have reduced our debt by INR4.6 billion … [and] our on-time performance has improved to 85% … compared to 80.6% for the same period last year.”
Pressure to be competitive on fares saw an average drop in rates of 10.9% compared to Q1 2016, coupled with an increase in expenditure of 17.5% for the quarter. Costs had also increased by 16.8% year-over-year to INR38.9 billion for the quarter. However, there is some good news where ancillary revenue is concerned, with figures showing a rise of 20.8% to INR5.8 billion.
Currently the low-cost carrier operates a fleet of 109 Airbus 320s and holds a 38% share of the Indian commercial aviation market. It also anticipates increasing available seat miles by 25% over the next few months, operating to 35 domestic and 5 international destinations.
Currently IndiGo is being challenged by the delays in delivery of new A320neos and is now considering slowing down delivery rates to allow for time for the manufacturer to deal with required modifications to the Pratt & Whitney PXW1100G geared turbofan engine, predominantly relating to the engine’s shaft and compressor. In addition, a software fix is anticipated to be complete by the fall of this year after the FADEC digital engine control system began sending false alarms to the cockpit. (US$1.00 = INR66.69 at time of publication.)