Synopsis
IndiGo’s profit fell 75% to ₹549 crore in the third quarter due to ₹1,546.5 crore in one-off costs for customer compensation and implementation of new work rules. The airline faced disruption due to a shortage of pilots and a DGCA investigation revealed management failures in planning and implementing new rest rules, impacting its growth forecasts.
YEARSThe yield, an indicator of profitability, however decreased by 1.8%, the airline having been hit by a drop in the occupancy rate of its flights after the December crisis.New Delhi: IndiGo’s profit plunged 75% year-on-year to ₹549 crore in the quarter ended December, largely due to one-off provisions to compensate customers hit by a serious network outage and implement new work rules.
India’s largest airline said it incurred a one-time cost of ₹570 crore in compensation after canceling more than 5,000 flights in early December due to a shortage of pilots following the implementation of new rest rules. It also made an additional provision of ₹969 crore to restructure the salary structure as per the new rule.
Under the new structure, the share of basic salary has increased, thereby increasing the amount payable to provident fund, gratuity and pension.
Excluding the total exceptional items worth ₹1,546.5 crore, the company’s net profit would have stood at ₹2,096.3 crore.
Agencies Ongoing investigation
InterGlobe Aviationthe holding company of IndiGo, had posted a profit of Rs 2,448 crore in the year-ago quarter.
The airline, which carries six out of 10 passengers in the domestic skies, said it was strengthening its internal systems to avoid a recurrence of such disruptions, although an internal investigation to determine the exact causes of the disruptions is underway. “We will take certain long-term measures as we learn lessons from each crisis,” said Pieter Elbers, CEO of IndiGo. “We are looking at which international airlines have faced such disruptions and what the lessons have been. But our long-term strategy remains unchanged.” In its investigation, the regulator, the Directorate General of Civil Aviation (DGCA), found that the airline’s management failed to adequately identify planning deficiencies, maintain sufficient operational margin and effectively implement the new provisions on pilot rest hours. The DGCA said the primary focus on maximizing the utilization of crew, aircraft and network resources significantly reduced the buffer margins of IndiGo’s roster.
IndiGo’s operational revenue for the quarter climbed 6.2 per cent to ₹23,471.9 crore, compared to ₹22,110.7 crore in the same period last year.
The yield, an indicator of profitability, however decreased by 1.8%, the airline having been hit by a drop in the occupancy rate of its flights after the December crisis.
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The airline’s management tried to strike an optimistic note to its investors, while reducing its growth forecasts and saying its costs would increase due to reduced operations. The airline will only increase capacity by 10% in the January-March period, compared to the strong growth seen in previous quarters.
Growth will mainly come from international operations, with the DGCA having implemented a 10% cut to IndiGo’s planned domestic programme, limiting its ability to increase flights.
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