With Neo engine issue solved, analysts expect higher passenger growth and lower fares as capacity is set to increase
IndiGo, India's top carrier, posted fourfold, or 294%, growth in net profit for the second quarter at Rs 551.55 crore, helped by higher passenger revenue and credit received from aircraft engine maker Pratt & Whitney and aircraft manufacturer Airbus for aircraft grounding and delivery delays.
Revenues grew 27.2% to Rs 5,505.56 crore in the reporting quarter while income from operations jumped 27% to Rs 5,291 crore.
Other income rose 33.5% to Rs 214.5 crore. The load factor rose 180 basis points to 84% while the yield rose 8.9%.
"Profitability for the quarter was favourably impacted due to better revenue management compared to last year as well as credit received from Pratt & Whitney and Airbus related to aircraft groundings and delivery delays," the airline said in a statement.
Indigo is the largest airline in the country in terms of market share with over 38% of domestic air passenger market. The airline operates a fleet of 141 aircraft including 24 A320 Neos. It had placed an order for over 430 aircraft, some of which have been delivered.
IndiGo and GoAir reportedly faced difficulties earlier this year due to P&W engine issue, following which many flights had to be cancelled
IndiGo had said in July this year that the engine issues were eating into its margins and it was forced to lease planes for short-term to make up for the shortage.
Meanwhile, ICICI Securities Aviation Report said that Neo operators are expected to benefit from the revised P&W strategy of prioritising existing planes for spare parts.
In its recent call, United Technology, the parent company of P&W, said that it has changed its plan in its engine delivery order, by which more spare engines will now be redirected to existing airplanes instead of newly built airframes waiting for engines.
On the bearing seal issue, the ICICI Securities report said that P&W indicated that it would be an extension of an in-service fix that affected operators flying in particularly harsh environments, notably India, and was largely completed. P&W shipped 120 GTFs in the third quarter, nearly doubling its first-half output of 134, which was plagued by nagging supply-chain issues tied to fan-blade production. The uptick has P&W on pace to meet its full-year guidance of 350-400 engines. P&W has reportedly provided 20 spare engines to IndiGo and Go Air and none of the A320neos is grounded now.
ICICI Securities expects the traffic growth to improve in second half of this fiscal on the back of better spare engine availability for Neo operators. Additionally, Jet is also set to add total eight aircraft by this fiscal end. "This essentially implies that airlines remain on track to meet our FY18 passenger estimates. The trend of lower passenger growth and higher fares is likely to reverse in H2FY18, offset by higher crude prices." the report said.
PROFIT SOARS
- Profitability for the quarter was favourably impacted due to better revenue management compared to last year as well
- Revenues grew 27.2% to Rs 5,505.56 crore in the reporting quarter while income from operations jumped 27% to Rs 5,291 crore.
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
 "IndiGo")
)
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
)
){kind=small}
){kind=small}
)
)
)
)
)
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}