Release Date: July 26, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- InterGlobe Aviation Ltd (BOM:539448, Financial) reported a quarterly total income of INR202 billion, an 18% increase compared to the same period last year.
- The company achieved a profit after tax of INR27.3 billion, marking seven consecutive quarters of profitability.
- InterGlobe Aviation Ltd (BOM:539448) served around 28 million customers during the quarter, reflecting strong customer loyalty.
- The company is expanding its network, adding 30 new routes year-over-year, and enhancing international capacity to Central Asia.
- InterGlobe Aviation Ltd (BOM:539448) is investing in technology and customer experience, including the launch of a tailor-made business product, in-flight entertainment, and a revamped website and mobile app.
Negative Points
- The company experienced increased fuel costs, with fuel CASK rising by 10.5% year-over-year.
- Aircraft grounding issues remain a challenge, with around 70 aircraft grounded due to spare engine unavailability.
- Operational disruptions, such as the canopy collapse at Delhi's Terminal 1 and a global IT outage, impacted flight operations.
- Inflationary pressures and contractual escalations have led to an 11% increase in CASK ex-fuel.
- The company faces increased costs from damp leases and secondary aircraft, which are more expensive than originally planned aircraft.
Q & A Highlights
Q: My question is on the compensation that you have accrued in the other operating line. Is this a one-time thing? Or are you accruing it as and when you get more clarity on the level of compensation as you can?
A: So like we've been communicated since Q3, which is the December 2023 quarter end. We've been accruing based on the understanding that we had with the OEMs that has now been finalized and firmed up to a contractual arrangement that we've got into. So the current quarter that you will see is a combination of what we kind of finalize with them and a true up of the resources. (Pieter Elbers, CEO)
Q: I just noticed something that, normally when I see how many A320ceo you have at the end of this quarter, you have 38. This number was 31 at the end of the previous quarter. And what I understand was the end of last quarter, you had A320ceo damp lease of 11. At the end of this quarter 60. That means that it's the x the damp lease the A320ceo number has gone up from 20 to 22. So I understand why that would happen because these are older planes. Shouldn't you be -- giving it back? I mean, have you taken new A3 20ceos, what has exactly happened?
A: Yes. We've taken two additional second lien from the from as an ultimate to the AOG situation that we face. As you know that there are AOG situations that are happening with the new technology. So we are on a much safer way to go back to the ceo fleet, which is more kind of a secure for us to as a result, we've taken these two. But for the shorter duration of time, but not something that we've taken from a long-term perspective. (Pieter Elbers, CEO)
Q: Could you repeat what you said about recognition of dry lease versus wet lease and how should we look at it from an accounting perspective, impact on depreciation and finance the line item?
A: So what I spoke about was about operating lease and financing lease. So we do an operating lease -- large part of the lease was into a depreciation et cetera, maintenance line items. And the way you do it is you have a have a lease rental. You figure out the tenure of that lease. You then discount the same to a net present value and then you start depreciating that to depreciate a line item and the corresponding interest is then routed to the finance cost line. (Gaurav Negi, CFO)
Q: My question pertains to the demand environment. As to there have been some concerns about the world passenger traffic growth kind of moderating a bit. And given the fact that now we have a similar situation of the Q and some players, other players also impacted. So how should one look at the diluted -- muted passenger traffic growth? And also these are kind of softer. So how would you kind of characterize the demand environment and how would the growth look like of once AOG situation starts to normalize, should we be kind of prepared for a more moderated pace for next year. So how should how should one look at the current demand environment? Because there are some questions around whether how is the demand really that robust?
A: So maybe let me let me start off, I think we had a first quarter with the solid demand. What we have seen, of course, there were some comparisons to last year. You may recall last year, Q1 had some capacity fluctuations and disruptions. And now in the first quarter, clearly we had the elections and some of the impact on that, which are difficult to quantify but for sure, there was some effect on the on the demand itself. (Pieter Elbers, CEO)
Q: Just to hop on it. There is some competition which will be offset with the expenses as well. In this, which is what was stated in one of the notes. So just wanted to understand that has there been a significant increase in other costs or what exactly is the line item against which it is predominantly offsets.
A: It's only getting offset around one line item that we've considered right now is maintenance. So the rest of it is all sitting in the other operating income. So that's where the two categories of the compensation again allocated. (Gaurav Negi, CFO)
Q: If you can give more color about both the domestic as well as the international yields, whether you saw both of them started holding on versus the comparing quarters? Or it was more like the international, which was doing the heavy lifting there. And a related question is over the longer term when you were explaining about the pricing scenario and that whole India growth story, how do you see the yields between the domestic and international over the longer term? Like was you sort of alluding to that the domestic yield used should catch up and converge with internationally yield over the longer term?
A: If we look to yield developments, I think it's sometimes going a bit into waves of fluctuations because yield, to some extent is an outcome of the relationship between or the balance between supply and demand. And if that gets out of balance in yields or consistency to low and lines will be out of business. And if yields would be consistently to high, customers would no longer fly. (Pieter Elbers, CEO)
Q: Is it possible by any chance to share how much claim have been raised on Pratt & Whitney due to the AOG issue and how much have you achieved so far?
A: Well, Jignesh, we are -- Jinesh sorry, we will not be able to share that we've mentioned in earlier calls also that something between IndiGo and OEM. So this is not something that we'll like to discuss in this call. (Gaurav Negi, CFO)
Q: In terms of yield so you mentioned that the next quarter yields not going to be flat year on year. That confuses me a bit because, I think the last year second quarter, I think the capacity was up almost 20%. And this year, you're guiding much slower capacity growth and yet you're expecting the yield a flattish. So -- I mean, could you just break it down a bit and give us a bit more color in terms of, are you sort of reducing the fares to inflate the demand? Or is it like how much of it is like underlying strength and how much is because of the network mix. So for what exactly happened on the yield side. So if you could break that up and then give us a bit more color that would be helpful.
A: Yes. There's a couple of elements here. There's the year over year comparison. There's a quarter over quarter comparison. I think we all recognize that last year was a
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
