Wednesday, January 23, 2019

IndiGo Third Quarter Fiscal Year 2019 Financial Results Conference Call”

 Posted by Neelam Mathews
For all those who missed it! 
Courtesy IndiGo 

January 23, 2019
IndiGo January 23, 2019

Operator: Good evening ladies and gentlemen and welcome to IndiGo’s Conference Call to discuss the third quarter fiscal year 2019 financial results. My name is Stanford and I will be your coordinator. At this time, the participants are in a listen-only mode. A question-and-answer session will follow today’s management discussion.
As a reminder, today’s conference call is being recorded. I would now like to turn the call over to your moderator, Mr. Ankur Goel, Associate Vice President of Treasury & Investor Relations for IndiGo. Thank you and over to you sir.
Ankur Goel: Good Evening, everyone, and thank you for joining us for the Third Quarter Fiscal Year 2019 Earnings Call.
We have with us our co-founder and interim Chief Executive Officer – Rahul Bhatia and our Chief Financial Officer - Rohit Philip to take you through our performance for the quarter. Ronojoy Dutta, our Principal Consultant, Wolfgang Prock-Schauer, our Chief Operating Officer and Willy Boulter, our Chief Commercial Officer are also with us and available for the Question and Answer session.
Before we begin, please note that today’s discussion may contain certain statements on our business or financials which may be construed as forward-looking. Our actual results may be materially different from these forward-looking statements.
The information provided on this call is as of today’s date and we undertake no obligation to update the information subsequently.
A transcript of today’s call will also be archived on our website. We will upload the transcript of today’s prepared remarks within an hour. The transcript of the Question and Answer session will be uploaded subsequently.
With this, let me hand over the call to Rahul Bhatia.
Rahul Bhatia: Good evening everyone and thank you for joining us on this call.
We announced our third quarter fiscal 2019 financial results today.
This quarter, we reported a profit after tax of 1.9 billion rupees with a profit margin of 2.4%. Though we have seen a reduction in fuel prices during the quarter compared to the previous quarter, on a year over year basis, fuel prices are still 31% higher and the Indian rupee is weaker by 11%. Both these factors have impacted our profitability compared to the same period last year. Our unit revenue was down year over year but we saw an improvement in revenue performance during the quarter. It was encouraging to see a year-on-year improvement in RASK in November and December on account of improvement in the fares in the 0-15 day window. Rohit will talk Page 3 of 5
IndiGo January 23, 2019

about this when he takes you through our financial performance in detail.
As we have said before, we are focused on building a large and profitable air transportation network in and out of India and are adding capacity in line with our long term growth plan.
We added a net of 19 aircraft this quarter and ended the quarter with a total fleet of 208 aircraft. This has enabled us to expand our network both domestically and internationally.
Talking about our domestic operations first, we have increased our daily domestic departures by 75 flights per day during the quarter. While some of the metro airports are getting slot constrained, we are encouraged with the growth that we are seeing in tier 2 and tier 3 cities.
In addition to our focus on our domestic network, we have also strengthened our international presence. We started operations from 6 new international destinations and added 22 international routes during the quarter. Moreover, as part of our international expansion strategy, we have entered into our first codeshare and mutual cooperation agreement with Turkish Airlines. This will allow IndiGo customers to reach several European destinations beyond Istanbul.
Our unit costs, excluding the impact of fuel and foreign exchange, declined on a year-on-year basis. Moreover, as we add more A320neos and A321neos in our fleet, we expect further unit cost improvements. Maintaining our cost leadership is fundamental to our business and I am happy that we remain firmly on track to reduce our unit costs further.
We also remain focused on our operational performance. We were ranked as one of the best airlines for the second consecutive year amongst the top 20 mega airlines globally in terms of on-time performance based on the data compiled by OAG. IndiGo is the only Indian airline to have made it to this list. During the quarter, we had an on-time performance of 79.1%, Technical Dispatch Reliability of 99.87% and a flight cancellation rate of 0.45%.
Now let me take a step back and recap the year that has gone by. Going into the year, we set ourselves very ambitious growth targets to tap into this very unique opportunity that the Indian market presents. Over the last 1 year, we have taken delivery of 55 aircraft, roughly one aircraft a week. Not many aviation companies globally have the resilience and the organizational strength to grow this rapidly and still continue delivering strong operational performance. We have delivered on all parameters – be it ensuring adequate availability of pilots and cabin crew, growing the network to new markets, strengthening the internal processes and improving efficiencies. I would like to thank all our employees, especially the operational staff for their tremendous performance. In past, we have focused on setting up the right network domestically. Now with this in place, we are looking to strengthen our international presence. We have received our first A321 neo which has a higher seating capacity and lower unit costs compared to the A320neos and also has longer range. We plan to start direct flights to Istanbul from March and open other international destinations as the year progresses.
Overall, I am happy with the way we have grown so far and remain very excited with what lies ahead. Page 4 of 5
IndiGo January 23, 2019

With this, let me hand over the call to Rohit for a detailed overview of our financials.
Rohit Philip: Thank you Rahul and good evening everyone.
For the quarter ended December 2018, we reported a profit after tax of 1.9 billion rupees compared to a profit after tax of 7.6 billion rupees during the same period last year. We reported an EBITDAR of 16.8 billion rupees with an EBITDAR margin of 21.2% compared to an EBITDAR of 20 billion rupees with an EBITDAR margin of 32.4% during the same period last year.
As Rahul mentioned, our profitability was lower compared to last year mainly on account of the increase in fuel price and the depreciation of the Indian rupee.
The average aviation fuel price in India during the quarter was 31% higher than the same period last year. After adjusting for the increased volumes, this increase in fuel price resulted in higher fuel costs of 7.3 billion rupees compared to the same period last year.
The Indian rupee closed at 69.71 rupees per U.S. Dollar. The average exchange rate for the quarter was 72.1 rupees compared to 64.8 rupees in the same quarter last year. This had an adverse year over year impact of 2.7 billion rupees on our dollar denominated expenses.
Our total capacity for the December quarter was 21.6 billion ASKs, an increase of 32.9% compared to the same period last year.
Our revenue from operations in the December quarter was 79.2 billion rupees, an increase of 28% over the same period last year. Our other income was 3.1 billion rupees for the quarter.
Our RASK for the quarter was 3.70 rupees compared to 3.82 rupees during the same quarter last year, a decline of 3%. While in October, our RASK showed a similar decline as it has in previous months, we saw a much better RASK performance in November and December. This improvement in our RASK performance was largely because of improvement in yields especially in the 0-15 day booking window during these months. For the quarter, our yields were up by 3.7% to 3.83 rupees while our load factors were down by 3.2 points at 85.3%.
Our CASK for the quarter was 3.61 rupees compared to 3.16 rupees during the same period last year, an increase of 14.5%. This increase was primarily driven by increase in fuel prices and currency depreciation. The currency depreciation also impacted our CASK excluding fuel and as a result, our CASK excluding fuel was 2.04 rupees in the current quarter, an increase of 6.3% from the same period last year. Excluding the impact of foreign exchange, our CASK excluding fuel reduced by 0.4%. We remain relentlessly focused on maintaining our cost advantage and have taken various steps to create efficiencies and further improve productivity across the organization.
Our balance sheet continues to remain strong. Our cash balance at the end of the period was 141.4 billion rupees comprised of 46.2 billion rupees of free cash and 95.2 billion rupees of restricted cash.
Before I close my remarks, let me give you our capacity guidance for the coming quarter. We expect a year over year capacity increase in terms of ASKs of 34% for the fourth quarter.
With this, let me hand it back to Ankur.
The above prepared remarks transcript will be replaced with a full conference call transcript (including the Q&A portion)

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