Release Date: May 23, 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 its highest ever total income of around INR712 billion for FY2024, a 27% increase from FY2023.
- The company achieved an annual net profit of around INR82 billion, reversing a marginal loss from FY2023.
- InterGlobe Aviation Ltd (BOM:539448) has been profitable for six consecutive quarters post-COVID and for all four quarters in FY2024.
- The company launched seven new international destinations and expanded direct routes by 25% in FY2024.
- InterGlobe Aviation Ltd (BOM:539448) signed codeshare agreements with British Airways and Malaysia Airlines, and extended its agreement with Qantas, leading to a 45% growth in codeshare passenger numbers.
Negative Points
- The company faced headwinds in FY2024, including aircraft groundings, which impacted operations.
- There are inflationary pressures expected in FY2025, particularly in maintenance and airport fees, which could affect costs.
- The rupee's depreciation led to a foreign exchange loss of INR1.7 billion in the fourth quarter of FY2024.
- Non-fuel costs increased by 14.7% year-over-year in the fourth quarter of FY2024, driven by cost escalation, grounding-related costs, and higher employee costs.
- The company anticipates continued inflationary pressures in certain cost lines in FY2025, which could impact profitability.
Q & A Highlights
Q: Could you talk a little bit in more detail about the coming financial year, which are the line items where you see more cost pressure? And also, if you could reflect back on FY24, any one-off expenses that you had in FY24 relating to grounding?
A: The inflationary pressure is primarily around maintenance and airport fees. Additionally, normal inflation related to other expenses and employee costs will also play a part. The increased inflation levels are largely on maintenance and airport side, ranging from high single-digit to early double digits. There were some costs related to grounding that are still being negotiated, but no significant one-offs.
Q: My question was on the comment that you made that in 1Q this year, you are taking a similar revenue environment compared to 1Q of last year. So were you indicating like in terms of the yield direction?
A: We were indicating more on the passenger RASK level, balancing yields and load factors to match the revenue environment of Q1 last year. There are uncertainties in the market today, making precise predictions difficult.
Q: My question was regarding the spread for FY25 because you mentioned about the fact that FY24 should be looked from the perspective of headwinds we had. How should we look at FY25?
A: We are not giving specific guidance related to the spread for the whole year. We have provided capacity guidance for the first quarter and the revenue environment. The AOG count remains range bound, and we are not expecting significant changes.
Q: Can you please help us understand what could be the kind of ramp-up for the new business product? What could be the timeline for ramp-up and the potential routes?
A: The business product will be introduced before the end of the year, with more details to be announced in August. It is a natural evolution to meet the growing desire for premium travel options in India. The exact number of routes and introduction dates will be shared later.
Q: Just wanted to get a sense whether we have any incremental information regarding the pilot fatigue norms and whether it will be implemented for the entire fleet starting from June?
A: The matter is sub judice, and the decision has been deferred. We are awaiting the next hearing in July, so there are no further comments at this time.
Q: Are you still planning to purchase smaller aircraft like ATRs during the year? Any projections on that front?
A: We have options to buy ATRs and have purchased a few in the past. These options are still available, and we will execute the best option, whether it's leasing or using cash. Nothing has been ruled out.
Q: In Q1 FY24, we saw a big tailwind on the RASK/CASK spread due to a competitor going bankrupt. How should we look at Q1 FY25 given the inflationary pressures?
A: The revenue environment is expected to be similar to Q1 last year, but there are cost pressures. The spread will not be a repeat of last year's high levels due to these pressures, but increased capacity should help mitigate some of the impact.
Q: Can you share the international revenue share and profit share in FY24? How big is the contribution of codeshare arrangements in your international revenue?
A: International contribution is close to 27% on ASK terms and ranges between 20% to 25% on revenue terms. Codeshare partnerships contribute in the mid-single-digit range and have been growing incrementally.
Q: Is there any possibility of further orders of 100-odd planes on the ATR side?
A: We keep all options open at all times to serve our customers and drive growth. We have a solid basis with our current orders and will continue to explore options as needed.
Q: Is the new business product just about seats, or will there be a loyalty program as well?
A: We will unveil more details about the business product in August. We are also working to enhance our loyalty program, which is part of our strategy to address the evolving needs of Indian consumers.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
