InterGlobe Aviation Limited Q3 FY23 Earnings Conference Call Insights

Key highlights from InterGlobe Aviation Limited (INDIGO) Q3 FY23 Earnings Concall

Management Update:

• [00:02:17] INDIGO said, it had the highest ever quarterly revenue of INR154.1 billion and a profit of INR14.1 billion for 3Q23.

• [00:11:13] In 4Q23, INDIGO expects to operate at about 45% higher capacity vs. 4Q22.

Q&A Highlights:

• [00:14:27] Deepika Mundra of JPMorgan enquired about the guidance of 15% capacity expansion in the context of grounded aircraft situation and spare engine availability. Pieter Elbers CEO said the company is confident of achieving the capacity guidance of north of mid-teens for FY24 and INDIGO has the flexibility in adjusting it going forward depending on the demand situation.

• [00:16:38] Deepika Mundra of JPMorgan asked if there’s any impact of holding cost of the grounded aircraft and if it’s adequately compensated by OEMs. Gaurav Negi CFO said there is an impact due to AOGs. INDIGO added that it’s working with OEMs to get some relief.

• [00:17:36] Mitul Shah with Reliance Securities asked about consumer behavior after sharp increase in air fare, mainly from Tier 1 and 2 cities and the outlook. Pieter Elbers CEO answered that a significant part of INDIGO network is non-metros. The company is also providing network to Tier 2 and Tier 3 cities. So it’s not seeing much of an impact.

• [00:21:57] Mitul Shah with Reliance Securities enquired about ATF price being volatile and if INDIGO is doing any short to medium term hedging. Gaurav Negi CFO replied that INDIGO is not looking at ARF hedging anytime soon.

• [00:23:30] Mitul Shah with Reliance Securities queried about mid-teens plus growth in the international capacity for FY24 and its split. Pieter Elbers CEO clarified that it’s fine tuning its precise network plans for future. The company is optimistic going forward and identified some destinations like Nairobi and Jakarta to be opened in the coming year.

• [00:25:16] Achal Kumar at HSBC asked about the large liquidity in hand and usage plans. Gaurav Negi CFO replied that while INDIGO has INR22,000 crores of cash available, a big part is related to restricted cash related to maintenance. The FCF of INR10,000 crores is giving the leverage to invest in growth areas.

• [00:31:08] Achal Kumar at HSBC enquired about the competitive landscape. Pieter Elbers CEO answered that innovation by Tatas is good for the market. But INDIGO’s focus is to make sure it delivers the customer promise with cost leadership remaining the main essence of profitability.

• [00:32:42] Krupashankar NJ from Avendus Spark asked about the yields moving in Jan. and Feb. and outlook going forward. Gaurav Negi CFO answered that yields have softened compared to 3Q23, mainly due to seasonality. However, yields is holding up higher than pre-COVID levels. Also, it’s moderated down due to seasonality expected in 4Q vs. 3Q.

• [00:33:30] Krupashankar NJ from Avendus Spark enquired about the aspirations of cargo operations. Pieter Elbers CEO answered that INDIGO started cargo operation last year and has two freighters. So, INDIGO added that it’s an important part of it and is supplementing the total business of INDIGO.

• [00:34:44] Krupashankar NJ from Avendus Spark queried about international, if INDIGO is expecting more capacities deployed on geographies just opening up. Pieter Elbers CEO said domestic is the majority of INDIGO operations and will continue going forward. However, growth on international will be higher than growth in domestic.

• [00:39:09] Sabri Hazarika of Emkay Global asked if current fleet addition run rate will continue considering the order book of 500.  Pieter Elbers CEO replied that INDIGO will continue to build at a similar number as over the past some years.

• [00:41:04] Pulkit Patni of Goldman Sachs asked about how much yield has compressed based on first one month data on QonQ basis. Gaurav Negi CFO said no exact numbers can be given due to lack of data.

• [00:41:42] Pulkit Patni of Goldman Sachs also asked that given INDIGO has enough cash now, if it would think of buying planes than leasing in near term. Gaurav Negi CFO replied that it’s not off the table. When going through the planning cycle for next year, INDIGO will evaluate it and has the leverage to have that option.

• [00:47:52] Pramod Kumar at UBS asked about the domestic new location addition in the next 2 years. Pieter Elbers CEO answered that INDIGO will operate where there is a market and number of destination is not a target for the company.