IndiGo Q3 Profit Declines 18% to Rs 2,449 Cr Due to Forex Loss; Expands Global Destinations Plans This Fiscal

The financial landscape for IndiGo, the largest airline in India, underwent notable changes as it reported its earnings for the period ending December 2024. Despite experiencing an 18.3% decline in profit after tax, the airline managed to significantly increase its revenue through expanded capacity and heightened passenger traffic. This situation brings to light the complexities of operating in a volatile economic environment and highlights the strategies the airline is implementing to navigate these challenges.

Financial Performance Overview

In the third quarter of the financial year 2025, IndiGo registered a profit after tax of Rs 2,448.8 crore. This figure reflects a decrease from Rs 2,998.1 crore reported in the same quarter of the previous year. The downturn is largely attributable to foreign exchange losses incurred during the quarter. However, the airline saw its total income rise robustly, up by 14.6% to reach Rs 22,992.8 crore, compared to Rs 20,062.3 crore in the corresponding period of the prior year. Such growth in revenue is indicative of the rebound in air travel demand post-pandemic, along with IndiGo’s expanding operational capabilities.

Operational Capacity and Growth Strategies

At the close of December, IndiGo operated a substantial fleet of 437 aircraft and managed to transport approximately 31.1 million passengers within the same quarter. This expansion in service provision is critical as the airline eyes future growth, including plans to increase its international destinations from the current 38 to 40 by the fiscal year’s end.

The plan to add wet-leased long-range aircraft represents a pivotal shift for the airline. This strategy aims to cater to emerging long-haul travel markets and augment the existing fleet’s capabilities. By utilizing wet leases, IndiGo can bypass the time-consuming process of acquiring new aircraft, thereby quickly responding to increasing market demand.

Foreign Exchange and Currency Impact

The airline’s financial results were notably influenced by foreign exchange fluctuations, particularly the depreciation of the Indian Rupee. In the December quarter, the Rupee fell by approximately 2% against the US Dollar, resulting in a mark-to-market (MTM) foreign exchange loss estimated at around Rs 14 billion. Gaurav Negi, IndiGo’s Chief Financial Officer, clarified the implications of these currency movements, stating that a single rupee change impacts the overall position by roughly Rs 7.9 billion. In response to currency volatility, the airline has initiated a hedging strategy to mitigate potential future losses, assuring its stakeholders of a proactive approach to managing financial risk.

Operating Costs and Fuel Expense Trends

Fuel expenses, typically a significant portion of an airline’s operational costs, dropped by 6.1% to Rs 6,422.6 crore during the December quarter. This reduction comes at a time when total operational expenses surged by 19.9%, culminating in a total cost of Rs 20,465.7 crore. Such trends emphasize the fluctuating nature of fuel prices, which can significantly impact profitability.

IndiGo’s CEO, Pieter Elbers, stated that their financial performance, despite the adverse effects of currency and other operational costs, was facilitated by a robust demand for air travel coupled with decreasing fuel costs. This duality highlights the importance of effective financial strategies and operational execution in challenging market conditions.

Addressing Aircraft on Ground (AOG) Challenges

The airline’s operations have recently faced complications due to Pratt & Whitney engine issues, leading to an increased number of grounded aircraft. Elbers pointed out that the situation regarding Aircraft on Ground (AOG) has improved significantly, with the number of grounded aircraft now in the 60s range, showing a downward trend. He expressed optimism that this number would drop further, projecting groundings in the 40s by the beginning of the next financial year.

Given the strains caused by the AOGs, IndiGo is exploring various interim solutions to reintegrate long-range aircraft into its fleet. The intent is to expand its network and operational reach, particularly in response to recovering travel demand.

Hedging Strategies and Financial Position

IndiGo is actively refining its hedging strategies to buffer against currency fluctuations. According to Negi, the airline has recorded a gain of Rs 591 million from its hedging contracts in the most recent quarter. The current focus is on securing 60% to 70% of their positions over the next year while maintaining a lookout for possible extensions to the hedging window beyond the typical 12 months.

The company reaps around 10% of its total revenue from international operations, and building a robust hedging position aligns with the growth of its international capacity. Such diversification not only safeguards the airline against unfavorable currency movements but also enhances its overall financial stability.

Future Outlook and Strategic Initiatives

As IndiGo moves forward, it anticipates that operational capacity, denoted in Available Seat Kilometers (ASKs), will grow by approximately 20% in the fourth quarter ending March compared to the previous year. For international flights, this increase translates to an ASK index of around 28%. Such growth reflects IndiGo’s initiative to expand its service offerings in response to strong recovery in air travel.

In conclusion, unity and adaptability remain at the forefront of IndiGo’s operational and financial strategy. The airline’s focus on expanding its fleet capabilities through wet leasing, coupled with strategic hedging and proactive management of operational challenges, will likely position the company favorably as the airline industry continues to rebound.

Summary

IndiGo has demonstrated resilience amidst fluctuating market conditions and foreign exchange challenges. Although the airline reported a decline in profit after tax due to currency volatility, it achieved impressive revenue growth driven by increased capacity and passenger numbers. The implementation of effective hedging strategies, plans for fleet expansion, and a commitment to addressing operational challenges will be crucial for IndiGo as it navigates the evolving landscape of the aviation industry.

Frequently Asked Questions (FAQ)

What caused the decline in IndiGo’s profit for the December 2024 quarter?

The decline in profit was primarily due to foreign exchange losses linked to the depreciation of the Indian Rupee against the US Dollar.

How did IndiGo’s revenue perform in the same quarter?

IndiGo’s total revenue increased by 14.6%, reaching Rs 22,992.8 crore, reflecting strong demand for air travel and increased operational capacity.

What strategies is IndiGo implementing to tackle Aircraft on Ground (AOG) issues?

IndiGo is addressing AOG issues by exploring wet leasing options for long-range aircraft and working closely with original equipment manufacturers to reduce the number of grounded planes.

What impact did hedging strategies have on IndiGo’s finances?

Hedging strategies helped mitigate currency volatility’s negative effects, allowing IndiGo to record a gain of Rs 591 million from hedging contracts during the December quarter.

What are the projections for IndiGo’s fleet and international operations going forward?

IndiGo plans to expand its operational capacity by 20% in the fourth quarter and is looking to increase international destinations to 40 by the end of the fiscal year.

References

– InterGlobe Aviation financial release, December 2024.
– Indian aviation market reports, 2023.
– Analysis of airline operational performance, 2024.