IndiGo CEO Willie Walsh has said the airline has “no choice” but to hike airfares as soaring fuel costs and rupee depreciation put pressure on its finances. The airline is looking to raise ticket prices to offset a sharp increase in its fuel bill, although Walsh said it would seek to minimise the hikes.
The development comes as India’s largest airline reported a loss of Rs 1,879 crore in the September quarter, despite a sharp rise in revenue. While IndiGo narrowed its losses compared with the year-ago period, mounting operating expenses continued to weigh on its profitability.
“We have no choice but to look to increase fares in an effort to offset the very significant increase that we have seen in the fuel bill,” Walsh said during a virtual media briefing on Thursday, responding to a question on rising airfares and their impact on passenger demand.
However, Walsh said the airline would seek to minimise fare increases, pointing to IndiGo's low-fare model, which has helped drive growth in India’s aviation market.
"Obviously, we want to try and minimise the increase in fares that we are encountering. It has always been the case that India stimulates a lot of additional growth through the low fare that IndiGo has been able to offer in the market," he said.
The comments come amid rising fuel prices linked to the West Asia crisis and geopolitical uncertainties, which have increased operating costs for airlines. IndiGo and other carriers have also been levying fuel surcharges on tickets to offset the additional expenses.
INDIGO REPORTS RS 1,879 CRORE LOSS
InterGlobe Aviation, the parent company of IndiGo, reported a loss of Rs 1,879.1 crore in the second quarter of the current financial year, compared with a loss of Rs 2,582.1 crore in the corresponding period a year earlier.
According to a regulatory filing, the airline's total income rose to Rs 24,311.9 crore in the September quarter from Rs 19,599.5 crore in the year-ago period.
However, higher income was offset by a steep increase in expenses. Total expenses rose to Rs 26,188.4 crore during the quarter, while aircraft fuel expenses surged 67.2 per cent to Rs 9,966.8 crore.
The airline attributed the pressure on profitability to exceptionally high fuel costs and the depreciation of the rupee, which weighed on its financial performance despite the growth in income.
CEO RULES OUT SIGNIFICANT COST-CUTTING MEASURES
Despite the increase in operating expenses, Walsh said IndiGo's efficient cost structure and strong liquidity put the airline in a relatively strong position to navigate the challenging environment.
In his first media interaction since taking charge as IndiGo's chief executive in August, Walsh said the airline would continue to explore ways to manage expenses but did not anticipate significant cost-cutting measures.
"We have very strong liquidity, and that gives us a lot of options that many of our competitors won’t have available to them. So we will continue to look at any measure that can be taken, but you should not expect any significant cost measures being undertaken by IndiGo," he said.
Walsh added that the airline could still trim some expenses, although its existing cost base was already efficient. He also pointed to the higher cost structures of competitors as an additional challenge for them in the current environment.
"We can always trim some of our costs, but we have a very efficient cost base to start with, and obviously the higher cost base of many of our competitors is an additional challenge that they face in the current environment," he said.
With a fleet of over 400 aircraft, IndiGo operates more than 2,200 flights daily, connecting 140 destinations, including around 40 international destinations. According to the airline, it carried 12.3 crore passengers last year.
Source: India Today