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Our Bureau IndiGo has decided to return 100 A320ceos (current engine option) by the end of this year while continuing to induct the more-fuel efficient A320neos.
The airline has also decided not to go ahead with its ₹4,000-crore QIP plan as it believes its internal cash flow remains strong.
It believes it is better placed than its peers given the strong balance sheet with ₹18,400 crore in cash and equivalents. It generated additional liquidity of ₹2,100 in Q3. For the first nine months of FY21, the amount stands at ₹5,400 crore of the targeted ₹6,600 crore.
IndiGo’s parent InterGlobe Aviation had, in September last year, announced a price band of ₹1,125 to ₹1,175 per share for its planned qualified institutional placement. It planned to sell 3.36 crore equity shares with a fresh issue of 2,24 crore share and an offer for sale of 1.12 crore share by some promoter entities, as per a filing on September 11.
However, it has now decided not to go ahead with the QIP as its internal cash position is strong. The airline, with a market share of around 52 per cent, has been able to reduce its daily cash burn to ₹15 crore in December 2020 from ₹40 crore in March 2020.
Demand recovery
The airline has said that there has been a broad-based recovery in domestic demand aided by non-metro cities and improving load factors on the back of rising consumer confidence. The airline has also said that the capacity utilisation is currently at 75-80 per cent and is expected to reach 100 per cent domestic capacity by April 2021.
The management of the airline also said that it is optimistic about the sustainability of demand momentum. This is because it expects the emergence of traffic from non-metro cities in the post-Covid era, gradual opening-up of international operations, recovery in corporate air travel.
It proposes to reach 100 per cent of pre-Covid domestic capacity by April 2021 and deployment of 50 per cent of pre-Covid international capacity by mid-FY22. It plans to achieve 100 per cent of pre-Covid international capacity by end-FY22.
The company expects key international destinations (Saudi Arabia, Sri Lanka, etc.) to open up over the next 5-6 weeks. Business travel revenue was 22 per cent of company revenue pre-Covid; this fell to 8 per cent and is expected to settle at 15 per cent going forward.
Business travel demand from the IT and consulting sector remains a drag, while the pharma and SME sector employees are already travelling for business (although travel is at 30-35 per cent of pre-Covid levels).
According to a report of Motilal Oswal, passenger demand and yield were stronger over October-November, 2020 but crashed in December 2020 on reports of new Covid cases. As per daily passenger data published by the Ministry of Civil Aviation, domestic passenger demand has barely improved MoM in January 2021 at 59 per cent of last year’s levels (versus 57 per cent in December 2020) while airfares have further declined 14 per cent MoM in January 2021.
“We continue to believe in the various pre-emptive measures undertaken by IndiGo to come out stronger from the current crisis,” the brokerage firm said in a note to investors. It said employee cost was up 8 per cent quarter on quarter.
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