IndiGo Q1 profit slides, mulls slower induction of A320 neos

New Delhi, Aug 2: Hit by "competitive" airfares, IndiGo's parent InterGlobe Aviation on Monday posted over 7 per cent fall in net profit at Rs 591.77 crore in June quarter and plans to go slow on inducting A320 neos -- a move that is likely to adversely impact its ambitious growth plans.

Admitting that A320 neos continue to pose "operational challenges", IndiGo President Aditya Ghosh said the airline is working with Airbus and engine maker Pratt & Whitney to resolve the issues.

IndiGo Q1 profit slides

The largest carrier by domestic market share saw its quarterly net profit decline in the latest June quarter compared with Rs 638.89 crore posted in the year-ago period despite higher revenues. Total revenue during the April-June quarter rose 9.7 per cent to Rs 4,741.45 crore from Rs 4,211.54 crore in the same period a year ago.

"Profitability was lower than last year primarily because of competitive fare pressures. We have reduced our debt by Rs 458.9 crore during the quarter," Ghosh said in a release. The drop in average fares does not change our view on the potential of Indian market, Ghosh said, adding "we are committed to add on profitable capacity in the market," he said during the post earnings analysts call.

IndiGo's likely move to go slow on inducting the fuel-efficient A320 neos could have a significant negative fallout on the airline, whose ambitious future plans are majorly dependent on these new planes.

"Operationally A320 neo continues to be a challenge. We are currently looking at a scenario where we would slow down the delivery of our A320 neo aircraft to allow (engine maker) Pratt & Whitney catch up with the production of updated engine," Ghosh said.

Pratt & Whitney and Airbus remain focussed on fixing various technical issues that have been identified and "we are counting on them to stay focussed on resolving technical issue on a highest priority (basis)," he added.

At present, IndiGo -- which operates five A320 neos -- plans to have a total of 24 such planes by March 2017. "We have seen a 14.3 per cent saving with neos compared to the classic A320s (in the latest June quarter)," he noted.

Further, he emphasised that drop in average fares does not change its view on the potential of Indian market. Reflecting intense competition, IndiGo's average fare declined nearly 11 per cent to Rs 4,032 in the three months ended June. The same stood at Rs 4,524 in the year-ago period.


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