IndiGo’s Q2 load factor dips below industry average

Low-cost airline IndiGo, perhaps the only profitable airline in the country, has seen its load factor dip below the industry average in the second quarter of this fiscal. For the quarter, the airline’s average domestic passenger load factor was 73.3 per cent compared with the industry average of 74.8 per cent, largely because of aggressive pricing by some of its competitors. Although the load factor increased in October to 76.2 per cent, the trend of trailing average load factor continued. The average industry domestic load factor for October was 77.6 per cent.

Financial performance Sources in the airline said that during the second quarter, IndiGo’s financial performance took a hit as well. The airline does not disclose its financial performance as it is a privately-held company.

SpiceJet was able to increase its load factor even during September, historically the leanest month of the season, largely because of its market stimulation drive through reportedly well fenced, highly discounted fares on almost all its sectors that aimed to fill up seats that would have otherwise flown empty.

Companies such as SpiceJet and AirAsia India have rolled out highly discounted fares during the last few months.

But with SpiceJet’s Boeing fleet reduced to the twenties from thirties, as acknowledged by the airline, the airline’s capacity in November and a part of December has reduced, resulting in around 50 flights in its winter schedule being cancelled.

November and December are historically the peak months for domestic air travel. IndiGo, which received its 100th Airbus A320 November, and recently an additional Airbus A320 on short-term lease from ailing Singapore-based Tigerair, has deployed sufficient capacity to absorb the demand that SpiceJet may not be able to cater to.

With this, it may be the turn of IndiGo and a few others to increase their load factor now.

IndiGo today has the highest number of aircraft serving domestic routes. It has a fleet of 85 A320s, of which, one is short-term leased from Tigerair, while 84 are from the airline’s first order of 100 placed with Airbus in 2005. All 100 aircraft were inducted through a sale-leaseback arrangement. Of these, 16 aircraft were sent back to the lessors after the conclusion of a six-year sale-leaseback contract. The airline hopes to receive its Airbus A320NEO aircraft starting late next year.

IndiGo operates 548 daily flights connecting 36 destinations, including five international cities. International flights constitute 11 per cent of the total capacity deployed by the airline.

An analyst pointed out that SpiceJet’s market stimulation drive forced other airlines to respond with low fare sales as well, but Indigo may have not been able to stimulate the market to its full potential, resulting in the trailing load factors.

“IndiGo’s load factor dipped below the industry average for the entire quarter for the first time in its operating history. But IndiGo is set to strongly benefit in November and December because of the planned cancellation of certain flights by SpiceJet,” he said.

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