India’s largest carrier, IndiGo expects to return to operational profitability in the Q3 (October to December) period, CEO Pieter Elbers said. According to him, fuel, forex, and inflation continue to pose headwinds. However, international route expansion and fleet ramp-up plans are on track.

In an interview to businessline, Elbers talks about the new international route expansions, induction of larger aircraft (Airbus 321 XLRs), recovery in domestic demand and international travel, and the new fuel pricing mechanism. Excerpts:

Q

What is the recovery scenario like in international operations? 

Our long-term prospects are highly encouraging. We have been expanding our presence and enhancing connectivity with the addition of two new international destinations — Bahrain and Ras-Al-Khaimah. Direct flights from Mumbai to Istanbul have been announced too. We have also announced one-stop connections to France, Austria, Portugal, and Switzerland via Turkey through our codeshare partnership with Turkish Airlines.

Currently, about 25 per cent of our total seat-kilometres deployed constitute international flights. With demand for international travel to/from India continuing to grow, we aim at expanding international connectivity in coming months.

We are bullish on the market opportunities and will continue to add flights in existing and new markets.

Q

Your narrow-bodied aircraft aren’t sufficient for long-haul flights? 

There are enormous growth opportunities for travel to longer routes even with the current range aircraft available. Additionally, the (Airbus 321) XLRs, which are currently expected in 2024-25, will allow us to capture non-stop international traffic, which is now only served through one-stop competing hubs. We continue to remain very bullish about our future and this is reflected in our fleet order. 

Q

Considering global supply constraints, does any carrier or lease provider have spare aircraft in the market? How are the constraints being managed? 

Air travel operations are going through a strong period of recovery, and demand continues to rise in the upcoming winter season. To address planned capacity and expansion for growth, we are looking at all levers to offset the headwind posed by the global supply chain disruption.

Some of the measures evaluated include slowing down re-deliveries through lease extensions, re-induction of aircraft into the fleet, and wet-lease options within regulatory guidelines.

We are adjusting our fleet plans and lease returns to ensure minimal disruptions in our future capacity.

Basis our current estimates, our capacity guidance for fiscal 2023 remains unchanged and our focus is to ensure that we have adequate capacity to meet the travel demand. The capacity will increase by around 25 per cent in Q3 on a year-over-year basis.

IndiGo is continuously working on mitigating measures to ensure continuity in our network and operations.

Q

IndiGo is upping regional connectivity. What’s the viability of these newer routes?

There is a huge potential to deepen the penetration of air travel by enhancing accessibility and (at) affordable fares. This is our focus area. Currently, IndiGo is operating 1,600-plus flights a day, commands over half of the domestic market share, and has added many new regional markets such as Darbhanga, Durgapur, Bareilly, Kanpur, Agra, Gwalior, Kadapa, Pantnagar and Deoghar . We have been encouraged by the opportunities offered by these markets. Itanagar is our 75th domestic and 101st overall destination in 6E network.

Furthermore, we are in alignment with the government policy to encourage Atmanirbhar (self-reliant) Bharat and have recently set up our second hub for MRO (maintenance, repair, operations) in Bengaluru. We will continue to evaluate commercial viability of all available opportunities in future as well.

Q

But you are still in red?

Over the last couple of years, our yield performance has been strong, and it gives us faith that we can keep improving on that aspect.

We have seen 100 per cent recovery in corporate or business travel during April and May. Passengers are even exploring offbeat markets like Pantnagar, Agra, Bareilly, apart from the popular destinations like Srinagar, Leh, Dehradun, Bagdogra and Goa.

However, the depreciation of the rupee and higher jet fuel prices continue to be the major headwind to our profitability and remain a concern.

During the September quarter CASK (cost per available seat kilometre) increased by 1.3 per cent to ₹5.15 (as compared to June 2022 quarter) primarily due to rise in fuel costs.

Operationally, we continue focusing on strengthening our customer base, our fleet, network, processes, and employee talent pool.

While fuel and inflation continue to pose headwinds, we are reasonably confident that we will return to operational profitability in the third quarter.

Q

Any possible trend on ticket price movement?  

Given the extremely high-cost structure in the industry, we continue to provide highly affordable fares to our customers. It is encouraging to see that demand trend continues to remain strong. 

Q

A new aviation turbine fuel calculation — MOPAG indexing — came into effect from October 1. Two months down the line, has it had an impact?

A positive change on the ATF (jet fuel) front that is being effected is fuel pricing in line with MOPAG (Mean of Platts Arab Gulf). Over a period of time, with more transparency in this space, with ATF linked to MOPAG, (it) will help in bringing parity in fuel prices as per global developments, especially during low price cycles.