Interglobe Aviation - Q1 FY24 - Quarterly Earnings Call

Although the future of India's aviation industry looks attractive, there are uncertainties related to rising crude prices, ongoing engine issues, forex, geo-political tensions and inflationary pressures. But Indigo has been through a lot over the last couple of years where the world stood still due to covid. But Indigo made a remarkable comeback despite multiple Indian aviation players struggling to keep their businesses going.


9/5/20236 min read

Brief synopsis of Q1 2024 Earnings call of Interglobe Aviation:


Key Positives:

  • The firm is in the range of having 110 destinations and an impressive 500 routes.

  • With 1,800 flights a day they are able to offer almost 500 direct city pairs each day.

  • Awarded with “World’s Youngest Aircraft Fleet” in the 100+ aircraft category by ch-aviation.

  • With this order of 500 aircraft to be delivered between 2030 and 2035, IndiGo’s order book now has almost a 1,000 aircraft yet to be delivered well into the next decade, allowing us to become a global aviation player.

  • Signed codeshare agreements with various airlines from Europe and as far as USA and now offer codeshare flights to multiple European destinations and also New York, Boston, Chicago, and Washington.

  • Operating with 500+ routes with 200 routes added over the last three years only

  • Keen on leveraging on the massive opportunity in the five to six hour flying radius from India

  • In this financial year FY23, the firm’s customer complaints remained at an all-time low.

  • Have supplemented their business with two narrow body freighters to support India’s cargo growth and an additional one is planned to arrive later this year.

Key Negatives:

  • There is a new issue with the engines which was shared by Pratt & Whitney in late July, about certain probable manufacturing anomalies, which are leading actually to additional inspections. Although the inspection is supposed to happen in the phased manner and the planes needs to be grounded for inspection. The fleet size for first phase’s inspection is expected to be in single digits.

  • Given the lack of clarity on this situation, difficult to provide any sizeable impact on its planes.

  • Q2 is seasonally weak, so yields are expected to drop with an added impact due to rise in crude prices. Expecting deeper cut on the yields, but the load factors are going to be slightly better

Guidance from Management:

  • By the end of the decade the firm is planning to double itself in size. In other words, something that took them 16 years will now be achieved in less than half of that timeframe.

  • Remain confident in achieving our previous guidance on increase in capacity by 15-17% in FY24

  • As a share of the capacity the international capacity (Available Seat Kilometre - ASK) will reach towards 30% in the next two years.

Analyst' Questions and Answers in Brief:


  1. How are you looking at yields adjusting for crude prices and weak seasonality? - Expecting deeper cut on the yields, but the load factors are going to be slightly better than what we've experienced in the past.

  2. Given the ongoing issues with engine and capacity constraints, along with weak season and increase crude prices, wouldn’t you be trying to protect your margins and hold yields? - Q2, traditionally, is always a seasonally weak quarter. As a result, the demand goes down significantly. And that invariably has an impact on your yields also.


  1. We've seen staff as a percentage of ASK and airport charges as a percentage of ASK had sequentially jump. Does this reflect the annual increments that you talked about? - Yes, salary cuts are now restored along with the increments.

  2. Any other cost line items where you see inflationary pressures in the coming third quarter, maybe due to this engine issue or anything else on the cost side ex of fuel that you would like to call out? - The large part of the costs that have already come into this particular quarter in terms of unit costs but we are closely monitoring airport related maintenance charges


  1. In terms of deploying capital towards aircraft related acquisitions. Could you highlight a bit more as to what is the strategy there? - The extent of our free cash flow has been increasing. Avenues of deployment of the capital could be related to acquisition of aircraft and related equipment for aircraft, engines or smaller aircraft like the ATR.

  2. On the fleet addition side, have you firmed up on what would be the XLR capacity, which will be added over the next five years? - We are flexible and have not finalized the precise numbers.

  3. How would the international growth look like in your overall mix at least in the FY '24 and perhaps over the next four years, five years? - With the 5 new international routes, our share of international ASKs by the end of this year towards a range of 30% which is an increase from the low 20s where we were earlier.

  4. Could you provide more color on your plan of starting a VC arm? - It will be an LLP and we will be making early-stage investments in various companies, which are going to be adjacent to the aviation businesses.

  5. How are you strengthening your loyalty program? - What we have shared and we're actively working on that is that we will further enhance our loyalty program. We'll update all of you at the appropriate time on that.

  6. What are the factors that have again led you to go about assessing the possibility of buying aircraft and other assets? - if you compared to 2017-18, when we were buying assets, that was again, largely because we were accumulating cash through performances. But unfortunately, when COVID happened, we have to change courses. And as a result, we have to offload those assets that we had bought on our books.

  7. If it is purely the fact that the cash flow generation has been extremely strong, have you considered paying dividend to shareholders? - Yes, we are working towards that as we come into a positive net worth territory.

  8. Now the new planes which you are getting from Airbus are they all the CFM LEAP engines? Or you’re still taking engines from Pratt & Whitney - the GTF engine? - All CFM engines for the C.470 aircraft order.


  1. Are you still seeing a high proportion of less than 15 day booking window in the seasonally weak second quarter as well, given that you are seeing a relatively better load factor. - Yes, we continue to see the booking patterns similar to Q1.

  2. The ancillary revenue run rate has has not been that strong as what we've seen on the passenger revenue side. Any particular thoughts there? - Yes, we've seen some softness that we're looking into that because related to some baggage as well as fees revision that we carried out related to our convenience fees.

  3. What has been your market share in international? - If we take all flights in and out, India, we're in the range of 15% to 16% of market share, which is a mixture of international and Indian airlines. The Indian carriers have a somewhat lower share than the international carriers when it comes to traffic to and from India. That's precisely why we believe there's such an opportunity to grow that share and making sure that we get a bigger share of that pie. So that confirms our ambition and our strategy to grow faster on the international side.

  4. What kind of positive impact you had on your yield due to the disappearance of GoAir. And now if GoFirst fly again, what kind of impact do you see on the yields? - Difficult to give a number, but note that only 15% of our routes was overlapping with Go First.

Ongoing engine issues:

  1. Can you delve a little bit deeper in terms of the new Pratt & Whitney problem, where there are impurities in the engine, in the core metal, which has been used, how many engines of IndiGo have been impacted? - This is a new issue which was shared last week by Pratt & Whitney about certain probable manufacturing anomalies, which are leading actually to additional inspections.

  2. How many aircrafts have been impacted. Does this in any way impact your ASK growth guidance of 17% to 18% for the current year? - We are working with OEMs to assess the exact impact.

  3. In terms of the older engine, P&W engine issues, where are we in that and how does the current issue, do we completely need to ground aircraft? Or is it like you would be requiring replacement engine so that shouldn’t be a problem? - We're in close contact with Pratt to evaluate what's going to be the possible impact for the stage thereafter.

  4. Would Pratt be able to give you some spare engines at the time when you are removing those engines and sending it for testing or you have to ground? - We had a very intensive and open communication line with Pratt on the availability of spare engines and to make sure that we can continue to operate our fleet in the best possible way. Despite the fact that we have the present number of planes on the ground, we have been able to operate according to our capacity guidance by a whole range of mitigating measures such as extension of leases and even the two wide bodies we have on operation.