IndiGo parent InterGlobe Aviation posts Q2 loss amid fuel costs; shares fall 12%

Shares of IndiGo’s parent company, InterGlobe Aviation, plunged over 12 per cent on October 28 after the airline reported a net loss of Rs 987 crore for the quarter ended September 30, 2024, compared to a net profit of Rs 189 crore in the same period last year.

Despite revenue rising by 14.6 per cent year-on-year to Rs 17,759 crore, profitability took a hit due to fuel inflation and aircraft grounding costs. Shares traded at Rs 3,811.35 on the NSE following the results—marking IndiGo’s steepest single-day drop since February 2022.

Excluding foreign income, IndiGo’s net loss stood at Rs 746.1 crore, a considerable downturn from the Rs 806 crore profit posted in the prior year’s quarter. EBITDAR also saw a slight decline of 0.5 per cent to Rs 2,434 crore. Operating costs surged 21.9 per cent year-on-year to Rs 18,666.1 crore, driven by an 11.8 per cent increase in cost per available seat kilometre (CASK).

Operational Performance
Despite challenges, IndiGo recorded growth in available seat kilometres (ASK) and revenue passenger kilometres (RPK), up by 8.2 per cent and 7.4 per cent, respectively. However, the airline’s load factor slipped 0.6 basis points to 92.6 per cent, and revenue per available seat kilometre (RASK) saw a modest increase of 4.8 per cent, while yield rose 2.3 per cent to Rs 4.55 per kilometre.

Brokerages Respond: Optimism Remains
Kotak Institutional Equities maintained a positive stance, setting a target price of Rs 5,200, acknowledging the adverse impacts of groundings and fuel costs but highlighting a strong demand outlook. Similarly, Goldman Sachs recommended a ‘buy’ with a target price of Rs 4,800, noting that IndiGo’s overall yields and passenger metrics were favourable, although higher CASK impacted the quarter’s results. Conversely, Nuvama downgraded IndiGo to ‘hold,’ citing competitive overcapacity concerns and shifting valuation dynamics.

Pieter Elbers, CEO of InterGlobe, expressed confidence in IndiGo’s growth trajectory. “Despite headwinds, we are reducing costs associated with grounded aircraft and remain focused on international expansion,” Elbers stated.

As IndiGo navigates a challenging environment with increased costs and competitive pressures, its commitment to expansion, particularly in international markets, may provide growth stability going forward.