IndiGo’s daily cash burn has hit ₹19 crores ($2.6 million) during the March quarter as the second wave continues to decimate passenger traffic. The cash burn is up by over 25% compared to the previous quarter, as passenger traffic fell sharply. Let’s find out more.
During its earnings call yesterday, IndiGo spoke at length about its financial situation during Q4 of the fiscal year 2021 (January-March). The all-important figure of cash burn increased this quarter, from ₹15 crores ($2.05mn) in the last quarter to ₹19 crores ($2.6mn) this quarter.
The coming quarter (March to June) will likely see the cash burn increase since traffic dropped substantially during April and May. From a peak of over 310,000 daily passengers in early March to just 56,000 in late May, airlines have seen their load factors crash during India’s second wave.
However, it is important to note that IndiGo’s daily cash burn figure has improved since last year. The figure has dropped from ₹30 crores ($4.1mn) last June, to ₹25 crores ($3.4mn) in September, and finally just ₹15 crores ($2.05mn). However, this trend has been reversed by the second wave of COVID-19, which will see the burn rate increase.
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For IndiGo, the first quarter of this year was set to be a strong one. Passenger numbers remained strong from January to early March, even hitting new pandemic highs. However, the victory was a short-lived one. As cases began to rise across India by the end of March, IndiGo’s bookings fell commensurately.
However, it was not only the pandemic that made a dent in IndiGo’s results. The increasing cost of jet fuel has hurt the airline too, with costs up 67% quarter-on-quarter. As operations increased, the airline consumed more fuel, which was priced much higher due to government taxes and market rates.
However, despite the events of the last two months, IndiGo CEO Ronojoy Dutta remains optimistic about a recovery. During the earnings call yesterday, he said that he expects to see February 2021 passenger levels by as soon as the third or fourth quarter of this year. This would be a huge increase from the current lows.
He added that flight bookings are also strongly correlated to the prevailing COVID-19 cases, which means as India records fewer cases, more passengers are willing to take to the skies. This would be good news for the airline, as it looks to make a fairly quick recovery.
As IndiGo’s losses deepen, the airline is once again looking for new ways to increase its cash reserves. The carrier plans to raise ₹3,000 crores ($411 million) from institutional investors, a move it has not previously taken during the pandemic. Secondly, IndiGo also plans to increase its cash reserves through the sale-and-leaseback of new aircraft.
Additionally, IndiGo has reinstituted pay cuts for many employees through its limited leave without pay program. Overall, IndiGo has struggled through the second wave but remains on track to bounce back and continue dominating the market for the foreseeable future.
What do you think about IndiGo’s results? Let us know in the comments!