Saying that structural issues such as low yields and high taxes will have to be addressed, India’s largest domestic airline IndiGo chief executive Ronojoy Dutta said in an interview that the airline expects passenger traffic to revive domestically by the end of 2021 and internationally by mid-2022. This comes amid the airline reporting its fifth straight quarterly loss.
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Indigo’s plan to keep the rising debt under control
Indigo’s net debt rose to ?29,859.7 crore, while cash balance fell to ?18,568.5 crore at the end of 31 March. Ronojoy said that the key factor behind this is daily cash burn. Through December the firm dropped the cash burn which in turn increased again in the March quarter due to revenue shortfall. The revenue numbers reached 80% of pre-covid numbers. But, then again, it deteriorated rapidly in April-May. The firm is optimisitic due to 7 million vaccinations a day. Firm expects that once the covid numbers go down, our revenues should return to normal.
Indigo’s plan to keep the rising costs in check
Fleet is the most important aspect of the cost reduction programme. A more fuel-efficient A320neo(almost 15 % more fuel efficient) shall be replacing the A320ceo planes. So far, 25 A320ceo planes have been replaced by A320neo. Each year, 40-45 A320ceos shall be replaced with A320neos. There are 40 A321 planes, which have more seats and are 10% more cost-efficient (against A320ceos). This can help to target markets where we need an additional fleet with A321 planes.
Can IndiGo remain profitable amid structural issues ?
Two fold causes, both on cost side were the reason fora disappointing quarter. Pilot training was a big part of the cost hike. Second being the engine maintenance. With pilot training no longer an issue, the revenue side shouldn’t be a problem. Indian operating environment is very hostile for airlines with yields in India being the lowest in the world and it isn’t improving anytime soon.
Indigo’s Plan to Address the Issue
The middle-class income will grow quickly as and when the economy is back on its feet. A lot out of 1.3 billion people, who currently travel by train shall take the airway shall accelerate the process of recovery. Waiting for the government to do something about the taxes, Indigo is trying to be in every city with railway stations.
How Indigo Plans to Gain Fromm Passengers Wanting For Direct Flights?
Our fleet of A321 aircraft is good for us to deliver it to its destination, located 6-7 hours away from major Indian cities and international destinations, including:
- Shanghai
- Moscow
- Tel Aviv
- Jakarta
- Indonesia
This is a huge geography that needs to be understood. Nodal nodes are all around us, meaning while wearing single-stage movements, we will feel the impact because, frankly, there aren’t enough passengers to fill a wide-body plane. However, there are just enough passengers to fill a narrow-body plane, especially on non-stop routes
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