New Delhi, June 16, 2020: IndiGo NSE 1.24 % wants to operate half of its total daily capacity of 1,500 flights in July and resume international operations, possibly to the Gulf, by next month, Chief Executive Officer Rono Dutta told ET in an interview Monday, even as the industry faces headwinds on raising utilization since the stage-gated reopening of local flights late May.
Airlines are barely able to fill 50% of their flights on an average, industry data for the past week showed. Flights going to specific routes are getting healthy occupancy levels on only one side of the journey, while routes with lower supply and high demand have seen a huge rise in fares. Airlines with bigger networks, such as the country’s biggest by market share, is expected to fare better than rivals in a scenario such as this.
IndiGo aims to reach 70% capacity by March next year and 85% by April, Rono Dutta said, although net profitability may still be 14 months away.
While airlines are allowed to operate at 30% of their capacity, various conditions by state governments are holding that number down. IndiGo is operating close to 350 daily flights, below 25% of its pre-Covid schedule according to the reports published in economictimes.indiatimes.com.
“We have been very encouraged by what we have seen in the first few weeks of travel resumption. We have always known there was pent up demand that would play out in the first couple of weeks. However, the trend since then has been encouraging. We have analysed the traffic every five days and all the trends are up,” said Dutta, adding the airline’s load factors are up.
“Where we stand now, we think 30% of capacity is too low. We feel very bullish about going to 50%. So, the government! Please let us get to the 50%!”
utta said he wants the travel lockdown to be lifted as “we have hurt jobs way too much”.
Dutta said the airline is able to cover its variable costs and is contributing to its fixed costs, but is far from profitability.
“Our fixed costs are 40% of the system. So flying 30%-40%-50% of our capacity, there is no way we can cover that and make a profit. We have to have enough planes in the air to cover fixed costs and then we can talk about profitability,” said Dutta.
IndiGo is trying to cut costs via several stringent measures such as pay cuts as well as deferment of supplementary rentals. The airline hopes to add Rs 3,000 crore to Rs 4,000 crore to its liquidity via these steps in 9 months.
IndiGo’s is cutting back on its fleet addition plans and will end this fear with a fleet size marginally lower than 262 planes as of March end 2020.
IndiGo is taking deliveries of some Airbus A320Neo planes and is sending back close to 60 Airbus A320 CEO planes this fiscal year and an additional same number next fiscal year. The replacement will almost be one for one in the first two quarters of the fiscal but likely taper down in the subsequent two quarters.
Dutta said IndiGo’s chartered flights are profitable and more corporates might shift to chartered flights and avoid scheduled flights. It operates about 10 cargo and passenger flights on a charter basis daily.
