IndiGo announced its biggest quarterly loss in history yesterday. The airline posted a loss of ₹3,174 crores ($426.3mn) for the April-June quarter as passenger demand collapsed in light of the second wave of COVID-19. This quarter’s loss is even greater than the one IndiGo saw last year when flights were grounded for two months.
After a brutal second wave of cases across India, IndiGo’s finances were expected to be deep in the red. However, yesterday’s losses were larger than most expectations as the airline saw passenger traffic fall and costs remain high. Revenues were halved from last quarter to just ₹3,170 crores ($425.7mn) but were still higher than the same quarter in 2020.
The falling revenue meant IndiGo’s daily cash burn jumped from ₹19 crores ($2.5mn) to ₹33.4 crores ($4.48mn) in the June quarter. Considering the airline’s load factor stood at a meager 51.2% in May and 62.7% in June, the ₹3,174 crore ($426.3mn) loss was to be expected during these times, especially since airlines globally have seen their finances take a hit during a resurgence of the virus.
The airline also took notable foreign exchange losses and lower than expected interest income. The rupee has been falling against the dollar and reached new lows in May, hurting IndiGo since it pays key expenses like leasing in USD. However, these losses are only a small part of the airline’s larger operational struggles due to COVID.
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Future looking brighter
After a terrible Q1 of the fiscal year, IndiGo is looking to recover in the coming months. Already, traffic has begun bouncing back in June and July, allowing for a recovery from the last quarter. CEO Ronojoy Dutta also added that the airline’s focus is currently to add capacity quickly and is hoping to see the government lift its capacity limits on flights.
In a statement, Dutta said,
“Our financial results for the first quarter were severely impacted by the second covid wave. The number of passengers traveling declined sharply in the months of May and June. With the second covid wave receding, we are seeing a measured recovery in bookings for July and August.”
As India’s largest airline, IndiGo’s results paint a grim picture for the industry. Other airlines have already resorted to extreme measures to stay afloat, including huge pay cuts and even deferring salaries. The coming months will remain choppy for the airline industry, and with no government support coming forward, the recovery will take a while.
The good news for airlines is that India is quickly opening up domestically. States are now allowing fully vaccinated travelers to visit without taking a test, boosting demand. Moreover, with international destinations like the Maldives opening their doors once again, airlines have the chance to increase capacity and grow revenues once again.
What do you think about IndiGo’s results? Let us know in the comments!