Economy

High airfares delaying recovery in hospitality sector: ixigo

Abhishek Law | | Updated on: Jun 23, 2022

Man sitting alone and waiting for his flight | Photo Credit: zodebala

Benefits of international flight resumption should be visible in the current fiscal

High air fares, because of a rise in oil prices led by geo-political tension, has delayed the recovery of the hospitality sector; while benefits of international flight resumption should be visible in the current fiscal, the IPO-bound online travel agency, ‘ixigo’ said in its annual report for FY22.

Traveller confidence has improved and there is a jump in pent-up demand.

“At the end of FY22, though train reserved demand in the country had already surpassed pre-Covid levels, daily flight passengers, as well as bus passengers, still hadn’t fully recovered. International flight schedules have resumed and we expect that international flights will commence recovering in FY23, though the Russia-Ukraine situation has led to an increase in oil prices that continues to keep fares on the higher side, preventing more rapid recovery,” the company’s co-founders said in a letter to its shareholders.

‘ixigo’ added that its financial performance in FY22 and FY21 were “significantly impacted” by Covid and it had to “undertake emergency measures to reduce operating losses”.

These included steps such as temporary pay cuts and a “significant reduction on other fixed overheads”. Further, the second and third wave of infections (April-June 2021 and December 2021-February 2022) “led to business disruption”, resulting in operating losses.

Finances

While revenues in FY22 saw a 180 per cent rise year-on-year (y-o-y) to ₹380 crore (approximately), the company saw losses widen by 380 per cent to ₹21 crore. In FY21, the company had a profit of around ₹8 crore. In FY22, ticketing revenues increased 187 per cent, y-o-y, to ₹362 crore.

During the fiscal the adjusted EBITDA stood at ₹6.2 crore. Adjusted EBITDA was down 24.5 per cent from the ₹8.2 crore it reported in FY21. The reduction in adjusted EBITDA was primarily on account of an increase in other expenses, which rose by 204.5 per cent. (adjusted EBITDA is calculated before taking into account ESOPs cost and other income.)

Other expenses, which saw a substantial jump include customer cancellation and refund costs — which rose by over 1,000 per cent, y-o-y — on account of the free cancellation product/scheme for flights business from August 2021 onwards; increase in free cancellation transactions across business segments and also because of the impact of the consolidation of results of ‘Confirm Ticket’ & ‘AbhiBus’.

Sales promotion and advertising costs too rose sharply by 567 per cent y-o-y; partner support costs (up over 470 per cent y-o-y); and payment gateway charges (up 200 per cent y-o-y), among others. The company reported a negative EBITDA in FY22, of ₹7 crore (approximately), as compared to a positive EBITDA of ₹6.1 crore in FY21. Bank balances other than cash and cash equivalents increased by 664.85 per cent, y-o-y to ₹79.80 crore in FY22, it said in the annual report.

Published on June 23, 2022
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