IndiGo, India’s leading airline, has reported a loss of ₹986 crore in the second quarter of Fiscal Year 25 (Q2-FY25). This comes amidst a backdrop of higher aircraft rentals, softening demand, and intensified competition within the industry. While IndiGo has achieved a significant milestone by becoming the first Indian airline to cross a fleet size of 400 planes, the numbers also include 25 wet-leased aircraft, highlighting the complex situation the airline finds itself in.
Despite generating a revenue of ₹16,969 crore and other income of ₹789 crore, IndiGo struggled to cover its rising expenses. The airline cited a substantial increase in aircraft rentals, which have quadrupled compared to the same period last year. The management also attributed the higher costs to airport rentals, indicating the pressure they are facing to balance profitability with operational costs.
The airline acknowledged that the demand for air travel is rebounding in October, but the competitive landscape could lead to reduced yields, a significant concern for IndiGo. This dynamic is driven by both economic factors and increased supply in the market, as airlines like Air India Express and Akasa Air have launched promotional campaigns, including discounts for travel during the Diwali season. This suggests that the current market dynamics are affecting the entire industry, not just IndiGo.
Looking at the operational side, IndiGo has seen a reduction in aircraft on ground (AOG) from the mid-70s to the high-60s. This improvement, which is expected to reach the 40s by April 2025, will positively impact the cost per available seat kilometer (CASK). Additionally, the phasing out of wet-leased aircraft and the cost-efficiency of the A320ceo in the fleet are expected to contribute to better financial performance in the future.
To address the competitive environment, IndiGo is investing in digital initiatives aimed at increasing direct bookings. While direct bookings are currently in the high teens, the airline aims to increase this proportion, which is significantly lower compared to other international carriers. The management remains committed to cost leadership despite the challenges posed by supply chain issues.
The future of IndiGo hinges on its ability to navigate these complex market dynamics. The airline is poised for growth, with the launch of flights to Penang and Langkawi on the horizon and a plan to have 30% of its capacity dedicated to international routes. However, the current quarter will be crucial in determining the airline’s success. IndiGo’s ability to generate significant profits during the festival season, especially against a backdrop of increased competition from the Tata group of airlines, will be a defining factor.
The question remains: will IndiGo be able to maintain its pricing strategy or will it be forced to lower fares to drive growth? The Diwali period will be a crucial indicator, as it will reveal the airline’s ability to withstand pressure and attract passengers in a competitive market. This period will provide valuable insights into the future of India’s leading airline.