Indigo faces turbulence

Interglobe Aviation or Indigo is a big loser on the bourses today morning; volumes have surged 7 times and price has tanked 10% to Rs.1501. Its 52-week high and low stands at Rs.1911 and Rs.773 respectively.

Though the revenue rose 31% (YoY) at Rs.1575 crore, it posted a net loss of Rs.1062 crore v/s loss of Rs.652 crore. It did have an operating profit of Rs.97 crore v/ s loss of Rs.116 crore.

Seasonally Q2 is low and though analysts had expected a loss, this was way above what most had expected. The big reason for the loss despite the rise in revenue – Rs.320 crore provision towards maintenance on its older A320ceo aircrafts, spiking up its maintenance cost.

In an Earnings conference call, Aditya Pande, IndiGo’s new chief financial officer of the company said that the high maintenance costs will remain and will be the similar range for next couple of quarters and is likely to eventually go away only by 2022 once the new fleet of neos come in and the old A320ceo aircrafts are redelivered.

The market is also perturbed because management has cut its growth guidance for current Q3 on revenue per available seat kilometer, which  reflects an airlines, efficiency, from 5% to zero. It has cut capacity growth guidance for FY20 to 25% from 30%.