InterGlobe Aviation Ltd. (INDIGO) Q4 FY22 Earnings Concall Transcript

InterGlobe Aviation Ltd. (NSE: INDIGO) Q4 FY22 Earnings Concall dated May 25, 2022

Corporate Participants:

Richa Chhabra — Investor Relations

Ronojoy Dutta — Chief Executive Officer

Gaurav Negi — Chief Financial Officer

Wolfgang Prock-Schauer — President & Chief Operating Officer

Sanjay Kumar — Chief Strategy & Revenue Officer

Analysts:

Binay Singh — Morgan Stanley — Analyst

Deepika Mundra — JP Morgan — Analyst

Mitul Shah — Reliance Securities — Analyst

Chintan Sheth — Sameeksha Capital — Analyst

Arvind Sharma — Citi — Analyst

Aditya Mongia — Kotak Securities — Analyst

Achal Kumar — HSBC — Analyst

Mohit Adnani — CRISIL — Analyst

Pramod Kumar — UBS — Analyst

Iqbal Khan — Edelweiss — Analyst

Pulkit Patni — Goldman Sachs — Analyst

Joseph George — IIFL — Analyst 

Presentation:

Operator

Good evening, ladies and gentlemen and welcome to IndiGo’s Conference Call to discuss the Fourth Quarter and Fiscal Year 2022 Financial Results. My name is Fazan and I’ll be your coordinator. [Operator Instructions]

I would now like to turn the call over to your moderator Ms. Richa Chhabra from the Investor Relations team of IndiGo. Thank you and over to you, ma’am.

Richa Chhabra — Investor Relations

Good evening, everyone and thank you for joining us for the fourth quarter and fiscal year 2022 earnings call. We hope that you and your families are safe and in good health. We have with us our Chief Executive Officer, Ronojoy Dutta and our Chief Financial Officer, Gaurav Negi to take you through our performance for the quarter. Wolfgang Prock-Schauer, our Chief Operating Officer; Sanjay Kumar, our Chief Strategy and Revenue Officer and Kiran Koteshwar, our Chief Program Officer and Head of Investor Relations are also with us and are available for the Q&A 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 by the end. The transcript of the Q&A session will be uploaded subsequently.With this, let me hand over the call to Rono Dutta.

Ronojoy Dutta — Chief Executive Officer

Good evening, everyone and thank you for joining us on this [Technical Issues]. We reported a net loss of INR16.8 billion. Excluding foreign currency loss of INR6.1 billion, our net loss aggregated to INR10.7 billion. We swung from a profitable third quarter to a loss-making fourth quarter because of around 15% higher fuel prices and on 11% lower capacity due to Omicron and a lower RASK of 2.9%.

For the year ended 2022, we reported a net loss of INR61.6 billion. Excluding foreign currency loss of INR9.4 billion, our net loss aggregated to INR52.2 billion. Excluding currency impact, our operating losses reduced by around 18% year-over-year. We deployed around 55% higher capacity and reported around 77% higher revenue from operations in the fiscal year 2022, as compared to the fiscal year 2021.

Our financial results for the full-year and the reported quarter was severely affected by the pandemic, first by the delta wave and then by the Omicron wave, which hit us this quarter. Even with these challenges, we served around 50 million passengers in fiscal year 2022, an increase of 62% as compared to fiscal year 2021. Focusing specifically on the fourth quarter, it would be helpful to break the revenue discussion into two distinct periods of six weeks each. The first six weeks saw significantly lower demand because of Omicron. We operated an average of 1,098 flights per day with below average yields.

However, we saw a strong rebound in the six week starting mid-February once the rate of Omicron infection reduced. During this mid February to March period, we operated an average of 1,366 daily flight with a strong uptick in unit revenue. While overall RASK during the March quarter reduced marginally by 2.9% to INR3.97, primarily due to reduction in load factor by 2%, as compared to the December quarter.

Yields have remained a good story and held steady at INR4.40. Importantly, this is comparing a seasonally weak March quarter to a seasonally strong December quarter. As per the official aviation guide, IndiGo emerged as the sixth largest airline in the world and the fastest in terms of growth. We were ranked Number four in terms of punctuality worldwide. It is exciting to see IndiGo among the top airlines in the world, both in terms of scale and quality of service.

Towards the end of March, the government allowed international scheduled operations. We ended the quarter with over 100 international flights and are currently operating over 90% of our pre-COVID international flight. We also announced our proposed strategic partnership with Qantas Group. This proposal will be the fifth arrangement with an international carrier, along with American Airlines, Air France-KLM, Qatar Airways and Turkish Airlines. These partnerships will help IndiGo access new markets and a new set of customers.

We reported a CASK or unit cost of INR4.79 rupees for the March quarter, which is 18.9% higher sequentially. This higher unit cost was primarily attributable to adverse movement in rupees, reduction in capacity deployment and increase in fuel prices. We have just experienced two very turbulent years in our history and this would be a good time to step back and assess IndiGo’s performance.

We were hit by three waves of COVID-19 which caused a sharp decline in demand. We witnessed a sharp rise in fuel prices over the last few months. Capacity and aircraft utilization was severely curtailed. We reported large back-to-back losses totaling INR119.7 billion over the two-year. We also experienced a significant strain on our balance sheet. There is no question that we’ve taken it on the chin in terms of COVID, fuel prices and operating loss.

Now let us ask ourselves how IndiGo has responded to this crisis? We strengthened our domestic network. We focused on superior customer service to ensure a higher share of passenger. We right-sized our workforce, we improved our yields in an impressive manner. We positioned ourselves for an aggressive international expansion, with building connecting traffic at hubs and negotiating multiple code-sharing.

We significantly restructured our fleet to ensure lower maintenance costs and lower fuel burn, the two key drivers of our costs. We launched new initiatives such as cargo freighters and digital. We strengthened our relationship with the business partner. We restored our free cash balance to INR76.6 billion. Along with all these operational factors mentioned above, I would also like that we have exercised continuous improvement in governance, compliance and ESG initiatives.

The problems we have experienced in our two year performance such as COVID, fuel, large losses etc are of course all cyclical in nature. In contrast, all our responses have been strategic and sustainable in nature. Consequently, I’m proud to say, we have emerged as one of the top 10 airlines in the world, both in terms of size and quality and importantly with the fastest in terms of growth.

Looking ahead. we are blessed to be domiciled probably the most exciting aviation market in the world. And within that market, we are structurally the strongest player. Therefore, we are extremely bullish on the long-term outlook. We would like to thank our shareholders for the patience during these difficult times and assure them the profitability is very much on the top of our mind.

Now, let me hand over the call to Gaurav to discuss the financial performance in detail. As you are aware, Gaurav Negi has joined us as the new CFO. Gaurav has been with IndiGo from December 2021. He has vast experience spanning across more than two decades in several reputed organization and we are excited to have Gaurav as part of our team.

Over to you, Gaurav.

Gaurav Negi — Chief Financial Officer

Thank you, Rono. Good evening, everyone. For the quarter ended March 2022, we reported a net loss of INR16.8 billion. Excluding the foreign exchange in tax, we reported a net loss of INR10.7 billion. We reported EBITDAR of INR1.7 billion for the quarter ended March 2022 compared to an EBITDAR of INR20 billion for the quarter ended December 2021. For the year ended March 2022, we reported a net loss of INR61.6 billion. Excluding the foreign exchange impact, we reported a net loss of INR52.2 billion, compared to a net loss of INR63.3 billion for the year ended March 2021.

We reported an EBITDAR of INR11.5 billion for the year ended March 2022, compared to an EBITDAR of INR6.2 billion for the year ended March 2021, an increase of around 84% against the capacity increase of around 55%. Now some of the key variations of our performance in the March quarter as compared to the December quarter are as follows. Yield for the quarter remained steady at INR4.40. Reduction in load factors by three points led to a cash decrease of 2.9%. Our fuel CASK increased by 10.9% sequentially to INR1.58, driven by an increase in average fuel price by around 11%. Our CASK ex-fuel, ex-Forex for the March quarter was INR2.91, which is around 12% higher than the December quarter, primarily due to the — operating at a lower capacity. The update on cash is as follows.

We ended the March quarter with a free cash of INR77.6 billion, a marginal net reduction of INR0.5 billion versus the December quarter. Our total cash as on March 31, 2022, was INR182.3 billion. On the other key balance sheet numbers, we ended the quarter with the capitalized operating lease liability of INR316.7 billion and total debt including the capitalized operating lease liability of INR368.8 billion. Our ROU assets at the quarter-end were INR204.4 billion. The demand has picked up well during the latter half of March quarter.

Resumption of scheduled international travel will help us improve our margins. Based on our current estimates, our total capacity deployment in the fiscal year 2023 in terms of ASKs will be in the range of 55% to 60% higher than our capacity deployed in the fiscal year 2022, which would roughly translate into 13% to 17% growth as compared to our pre-COVID fiscal year of 2020.

Specifically for the first quarter of fiscal year 2023, we expect the capacity to rebound at almost 2.5 times the capacity deployed in the first quarter of fiscal year 2022. We are helped by the improvement in revenue performance, but currently challenged by an increase in fuel and weakening rupee. In order to address these headwinds, we are taking countermeasures but meaningful improvement in these two macro drivers will be critical for us to transition back on a path of profitability.

With this, let me hand it back to Richa.

Richa Chhabra — Investor Relations

Thank you, Rono and Gaurav. To answer as many questions as possible, I would like to request that each participant limit themselves to one question and one brief follow-up question if needed. And with that, we are ready for the Q&A.

Questions and Answers:

Operator

Thank you very much. [Operator Instructions] First question is from the line of Binay Singh from Morgan Stanley. Please go ahead.

Binay Singh — Morgan Stanley — Analyst

Hi, team. Thanks for the opportunity. Congratulations for a good performance in a very challenging environment. Overall, we are trying to understand how to think about profitability into the coming year. Clearly, in terms of capacity, that will be a record year for IndiGo and even on traffic side, we have seen very good traction. So could you talk a little bit about how are the yields playing out, are you able to pass on the cost pressures? Maybe to answer that, if you could share how were your yields in the second half of March quarter, because as I understand that the yield that you’ve reported also would have been adversely hit by very weak yields in the first half. So, could you share few thoughts on how to think about profitability? Secondly, the Forex loss looks much larger than we anticipated. Could you talk a little bit about that also? Thank you.

Ronojoy Dutta — Chief Executive Officer

Okay. So how do we get back to profitability? As we said, really the tug-of-war going on. And the tug-of-war is between, I think, a very good revenue performance and a very challenging fuel and the rupee weakening. And just staying on the revenue side, I think I’m really impressed with what our team has done on the revenue side. And I congratulate them for doing a great work. It’s not been easy. It’s clearly very — you almost have to hit the point — the sweet spot just right, because you can keep pushing up fares and then at a certain point demand actually falls off.

So judging which that point is and just pushing it to the right level I think is sort of a science and a art of all this. And again, our revenue team is doing a great job. March was the strongest month last quarter. And to give you a sense of where the turns are going, April unit revenue was 6% higher than March. And then May month-to-date unit revenue was again another 6% higher versus April which is what I mean by the revenue guidance [Technical Issues] but to counter — sort of balance the story, though, April fuel prices were 11% higher than March and May fuel prices were 6% higher than April.

So you have a tug-of-war, but the key to profitability is to keep managing our business on the revenue side. Of course, costs need to be under control, there’s always that. But we won’t save ourselves into profitability, we have to get it on the revenue side. And at the same time, hopefully, we get a break on fuel and the rupee. Did I answer your question?

Binay Singh — Morgan Stanley — Analyst

Sir, just to give us an idea, so what was your March yield?

Ronojoy Dutta — Chief Executive Officer

Do we have a monthly breakup?

Binay Singh — Morgan Stanley — Analyst

Maybe, just so that we can understand that what are the yields trending in absolute sense.

Ronojoy Dutta — Chief Executive Officer

We’ll find that in a second. While he is looking for it, Gaurav, you want to talk about the Forex, you had a question on Forex, right? Just begin.

Gaurav Negi — Chief Financial Officer

Yeah, Binay, on the Forex front, the impact has been around INR600 crores, now that’s largely because the rupee has weakened approximately 2 points between December and March. So a large chunk of the Forex impact that you’re seeing is mark-to-market. Given that the balance sheet that we have is close to INR300 crores of capital leases that we have, that will give you that — we’ve got a INR600 crore FX impact coming in the quarter, largely because the rupee weakening by 2 points [Technical Issues].

Ronojoy Dutta — Chief Executive Officer

Okay. Sanjay just tells me that the March yield was 5.14. Sorry, one second. April was 5.14. March was 4.7. So Binay, I hope you are done with that? Next question.

Binay Singh — Morgan Stanley — Analyst

Thanks, team. I’ll come back in the question queue.

Operator

Thank you. The next question is from the line of Deepika Mundra from JP Morgan. Please go ahead.

Deepika Mundra — JP Morgan — Analyst

Good evening, and thanks for the opportunity. Just following up on yield, so March 4.7, April 5.1, what would be the — how much of the delta would be potentially from the reopening of international flights?

Ronojoy Dutta — Chief Executive Officer

Well, we don’t want to get too much in detail now. I already feel that I’ve given too many numbers. So, look, international as — I can say the international profitability has been stronger than domestic and it always is. So that’s a good news, but I don’t want to now break up yields into domestic versus international.

Deepika Mundra — JP Morgan — Analyst

Okay. And the significant capacity increase that you’re planning for next year, could you give us a sense as to how much of that skew is again towards international versus domestic?

Ronojoy Dutta — Chief Executive Officer

So I can only give you our long-term trajectory on this. Short-term, as you can imagine, there is a lot of volatility. For example, Sri Lanka is a problem, it’s not opening as fast as we’d like, China is absolutely closed. So there’ll be some sort of start/go through the process. Overall, pre-COVID, our capacity was 25% of our system, our projection is that in five years from now international will be about 40% of [Technical Issues] So international will be growing faster but the rate of growth will very much depend on how markets open up separately — individually.

Deepika Mundra — JP Morgan — Analyst

Understood. And if I may just sneak in one more. The code-share agreements, how do they pan out in terms of profit dynamics as compared to flights run singularly by IndiGo?

Ronojoy Dutta — Chief Executive Officer

So the key to making money on code share is flow rate agreements. So every time a passenger from KLM, or Qatar or anyone gets on our flight, the question is how — what sort of pro rate are we charging them and how do we compare to our alternatives. So we have a good position in the marketplace as you know, and therefore are able to negotiate quite attractive pro rates and therefore, we are excited about our code-share agreement.

Deepika Mundra — JP Morgan — Analyst

Okay, thank you so much and good luck for next year.

Ronojoy Dutta — Chief Executive Officer

Thank you. We need it.

Operator

Thank you. The next question is from the line of Mitul Shah from Reliance Securities. Please go ahead.

Mitul Shah — Reliance Securities — Analyst

Good evening, sir. Thank you for giving me opportunity. Sir, the way rupee movement is happening in this quarter in April and May, even slightly sharper than the previous quarter, then which implies that losses could be like INR700 crore, INR800 crores this quarter. Is it a right understanding? Or even more than that?

Ronojoy Dutta — Chief Executive Officer

We know that — look, so I don’t know how you — how investors generally look at above the line and below the line. So we are trying desperately to be profitable above the line. But if the rupee keeps going as it’s going and then we have this big mark-to-market direction, then below the line will take a big hit. So, yeah, as the rupee depreciates further, you can expect big mark-to-market adjustments.

Mitul Shah — Reliance Securities — Analyst

Sir, my second question is on what is the kind of a feedback or you people are experiencing after a sharp price hike on the ticket side — ticket price increases, what is the response from the customer side, still the affordability seems to be reasonable, or do you think — do you feel any negative sizable — noticeable negative impact on the traffic side?

Ronojoy Dutta — Chief Executive Officer

So clearly, it’s a balancing game. If you see, the customer resistance to higher prices, you see it on the load factors, right? I wish our load factors were higher than they are, and they’re not because we are getting some resistance. At the same time, the fact that with unit revenue up, which is what’s important. It doesn’t matter whether you take it on yield or in load factors you want the unit revenues to keep going up and we are doing quite well on unit revenue and you see it with the performance. So, yeah, there will be load factor pressure as we increase prices, no question.

Mitul Shah — Reliance Securities — Analyst

Lastly, on the — after this capacity utilization and capacity increase for FY ’23, whichever number you indicated, would that to be close to pre-COVID level or even higher, or still it will remain below pre-COVID level?

Ronojoy Dutta — Chief Executive Officer

We are already higher than pre-COVID levels.

Gaurav Negi — Chief Financial Officer

Like we said, it’s going to be close to 13% to 17% higher.

Mitul Shah — Reliance Securities — Analyst

Okay. Yeah. Thanks, sir.

Ronojoy Dutta — Chief Executive Officer

So I mean, through all these question, I just have to emphasize, the revenue performance has really been good. And I would say surprisingly good, and thanks again to our commercial team, they are doing a great job on the revenue side. As you’ve alluded, is there customer pressure, is there customers resistance, [Indecipherable] fares are going up, but we have to, to survive. With fuel doing what it’s doing, we have to raise fare. And as we’ve said many times, India has the lowest price in the world. So I hope that the stories are sustainable over the long term, we do need to higher fares, but this fuel and the rupee really are a problem.

Mitul Shah — Reliance Securities — Analyst

Right. Yeah. Understood, sir. Thank you very much.

Operator

Thank you. The next question is from the line of Chintan Sheth from Sameeksha Capital. Please go ahead.

Chintan Sheth — Sameeksha Capital — Analyst

Thank you for the opportunity. Am I audible?

Operator

Mr. Seth, sorry to interrupt you. The audio is not clear from your line.

Chintan Sheth — Sameeksha Capital — Analyst

Am I audible? Hello?

Operator

Yeah.

Chintan Sheth — Sameeksha Capital — Analyst

Yeah. Sir, on the capacity again, with industry getting consolidated and new players are trying to get — start the operations and our plan of very strong capacity addition next year, do you foresee — what’s your take on yield? How it will pan out?

Ronojoy Dutta — Chief Executive Officer

So, the industry has been behaving quite rationally, I am used to say. We do have a lot of players already and everyone recognizes, with the fuel doing what it is doing, with the large losses we’ve incurred, we all need to repair balance sheets. And so I’m hopeful that the new players — actually seasoned players, if you look at the management team at both Akasa and Jet Airways and so forth, they are seasoned players. So I expect that the rational behavior will continue and we wouldn’t see any increasing price wars or anything of that.

Chintan Sheth — Sameeksha Capital — Analyst

And second on — a small bookkeeping. Sequentially, we see opex as well as employee cost rising. I understand that we must have planned for better capacity, but because of Omicron we kind of need to pull back our capacity and that resulted into timing-wise rationalizing our cost. So going forward, what kind of run rate we should look at? If you can throw some light on that, yeah?

Ronojoy Dutta — Chief Executive Officer

You’re talking of employee costs specifically?

Chintan Sheth — Sameeksha Capital — Analyst

Yeah, sequentially, it has increased, both employee cost and other opex. So I’m just trying to understand how should the trajectory look like.

Ronojoy Dutta — Chief Executive Officer

So employee costs, clearly, we have some snapback in wages and it’s not over yet. As you know, for example, pilots, we’ve given 8% and promised another 6.5% in November and we’ll keep looking at those numbers and as profitability improves, we will be doing some fare raises along the way. And so, yeah, rates will go up as far as productivity goes, that’s where our emphasis is. So in every department, from flight crews to operations to commercial, we are looking at employee productivity and trying to sort of manage that as best as we can, but absolute fares, yes, you would expect them to go up in an inflationary environment.

Chintan Sheth — Sameeksha Capital — Analyst

Any number in terms of ASK or a percentage growth, or…

Ronojoy Dutta — Chief Executive Officer

No, I mean it’s a very delicate — again, this I can say, we have to manage revenue very carefully. We have to manage this also very carefully. We have to be absolutely conscious of the fact that our employees are facing an inflationary environment and that we need to give pay raises. We are very conscious of the fact that they have all worked very hard through two years of COVID. At the same time, we need to keep an eye on the profitability of the company as well. So it is a balancing act and I wouldn’t like to give any forecast.

Chintan Sheth — Sameeksha Capital — Analyst

And other expense from INR742 crores to INR834 crores, sequentially?

Gaurav Negi — Chief Financial Officer

Again, sequentially, we had a one-off in Q3. So excluding that there have been some increases in opex cost in line with some of our increases that we’ve seen in international operations. That is driving some of the cost up, but again, to Rono’s point, in terms of — as a percentage of ASK, that’s what we’ll be focused on and we’ll try to keep it lower in terms of — as a percentage of ASK versus just looking at an absolute number.

Chintan Sheth — Sameeksha Capital — Analyst

Okay. Sure. Okay, thanks.

Operator

Thank you. The next question is from the line of Arvind Sharma from Citi. Please go ahead.

Arvind Sharma — Citi — Analyst

Yeah. Hello, good evening, sir. And thanks for taking my question. First question, sir, would be on your fleet strategy. When you give that number for ASK, is there any fleet some number in mind because on a quarter-on-quarter basis, your absolute amount of planes have gone down? So is there any number that you have in mind for FY ’23 in terms of fleet expansion?

Ronojoy Dutta — Chief Executive Officer

So part of the reason why our capacity is going up because we have such a large number of A321s coming. I mean, it’s become a very significant part of our fleet. As we said before, our overall fleet count won’t change much, it will be roughly flat but the capacity will go up because of higher [Technical Issues].

Arvind Sharma — Citi — Analyst

Thanks, sir. That’s helpful. Secondly, sir, I think this has been in a way alluded to in previous comments. The fares have risen quite sharply, but still demand is holding on. Where do you think is that inflection point where anything beyond that in terms of increase in fares would start impacting demand negatively, even in…

Ronojoy Dutta — Chief Executive Officer

This is a balancing act and it’s a day-to-day activity and almost minute-by-minute activity. We have to just watch the loads carefully. Our job is to maximize the revenue on each flight. And when it comes from load factors or yields, we are sort of agnostic to that, but we need to push revenues per flight up and that’s what we’re focused on doing. Within that, I would say that our customer service is very, very strong. and if we have a strategy on customer service, it’s almost like we want to make sure that the customer has to almost ask themselves, why would I make a mistake of not booking IndiGo?

So through the entire process, in the front end, in the back end. In the front end, we make sure we give more frequencies more connectivity, so the customer wants to book us. When the fly us, we make sure we provide reliable service, we are courteous, and even after the travel, we want to build trust with the customer. If you lose your bag, if you need a refund, you can trust IndiGo to do it just right. So a part of our revenue strategy is just build great customer service and make sure you get a disproportionate share of the industry revenue.

Arvind Sharma — Citi — Analyst

Sure, thank you so much, sir. If you could just inform on the same lines, does the floor and the ceiling on the fares still exist in terms of the regulatory…

Ronojoy Dutta — Chief Executive Officer

Very much so. Yes. Very much so, yes.

Arvind Sharma — Citi — Analyst

Okay. And you don’t expect it to go away. So you expect those — that big discrepancy in the 15-day window and beyond to stay for some time?

Ronojoy Dutta — Chief Executive Officer

Hard to tell. Right now they are here and we abide by them.

Arvind Sharma — Citi — Analyst

All right. Thank you so much for taking my question.

Operator

Thank you. The next question is from the line of Aditya Mongia from Kotak Securities. Please go ahead.

Aditya Mongia — Kotak Securities — Analyst

Good evening, everyone. And thanks for the opportunity. My first question was on the growth that you envisage for air traffic in general, if the yields kind of stick around the INR5 or higher mark. I’m just trying to get a sense whether the past growth rates can still be repeated after, let’s say, a one year lull, or should one structurally start thinking about lower growth rates for the sector?

Ronojoy Dutta — Chief Executive Officer

So I am not sure I understood your question exactly, but you’re saying at higher yields do we expect the growth to continue. So look, let’s do total industry revenue. As you know, industry revenue is roughly — gross prices foster the economy. And fact is there is pretty strong growth in the economy. We had a downturn, but then we recovered nicely. And you look at all the parameters, such as GST collections and all that, and it tells you, hey, the industry — the economy is fairly strong.

So as long as the economy is strong and we expect industrial revenues as a whole to grow. Now whether we take it again in yields or in volume it’s up to the rational players in the industry to decide. And clearly, with higher oil pricing, you can’t take it in volume, you have to take it in yields. So that’s where we are as an industry.

Aditya Mongia — Kotak Securities — Analyst

Yeah and then just to kind of clarify this more, let’s say the period from 2,000 — 2020, so air volumes growing at 3x GDP — almost 3x GDP. The question that I’m asking is that with yields having made such a big jump-up, should one start thinking through lower multiples to GDP growth for growth — air traffic growth from here on?

Ronojoy Dutta — Chief Executive Officer

So let me [Indecipherable] your question. When we say it’s a multiple of GDP, we are talking of revenues. So, yes, at a certain period, revenues might have gone up three times and revenues across the world, whatever the GDP is the revenue will grow around 2.5 times, that’s the norm. Within that, the industry players can say, okay, this much of revenue coming, do I need more volume to be pushed or do I want yields to remain high, and that will depend on all players and their individual behavior. But the total revenue growth will not slow down, it will be 2 times, 2.5 times GDP growth.

Aditya Mongia — Kotak Securities — Analyst

That clarifies. The second question that I had was more on the ability of a better IndiGo to — on slightly more — on a relative basis. Now with the yields already being so high, are there opportunities to price your offering at slightly higher rates becoming — are they becoming easier or more difficult?

Ronojoy Dutta — Chief Executive Officer

So, it’s about the same. But, look, our yields are better than industry, right, and they are increasing faster than the industry, and the question is why and maybe your secondary question is, is that sustainable. Why are our yields growing faster in the industry? Number of factors. First, I’ll start with the network. Our network has more penetration, our network provides low frequency and importantly, our network provides better connectivity. So if you’re going from point A to point B, there might be six airlines flying it, but IndiGo through its connectivity gives you far better options than anyone else, morning, afternoon, evening, we give you all the options. So our connectivity is a huge reason for customers to book us over everyone else, so that’s one.

Second, as I said, is overall service, reliability, et cetera. And third is, I would say, trust. Whether we have a disruption, we have a plan B. If you have a refund to be made, we are very, very diligent in making sure, hey, let’s not hold on to a customer money, give it back fast. If your bags are lost, I’ll tell you, we have a team that’s like aces, they go around finding lost bags, lost knapsacks, lost laptops. So this whole package of network, customer service, trust, all this builds into higher yields, and that’s why yields are going up. And yeah, I believe they’re sustainable.

Operator

Thank you. Mr. Mongia, may we request that you return to the question queue for follow-up questions. Next question is from the line of Achal Kumar from HSBC. Please go ahead.

Achal Kumar — HSBC — Analyst

Yeah, hi, thank you for the opportunity. So, I have two actually. So one, Mr. Dutta, if you could please take a slightly deeper dive into the network. So basically if you could talk a little bit more about how the metro-to-metro routes are performing, how metro-to-non-metro performing, where the yields a high and how the competitive landscape looks like — looks, because everybody is sort of trying to enter metro to non-metro because there the yields are much better. I mean, it’s fair enough, we can understand that. But with the rising competition, of course, there’ll be a yield under pressure because the demand has not developed fully there. And similarly, domestic versus international, how do you see the international, because the fares are very competitive. On Dubai you’re flying for 14,000 and it’s also flying for 14,000. So looks like the competition is very high. So if you could talk about — take a deeper dive into the network.

Secondly, on the inflation side. Of course, the inflation is righting — sorry, inflation rising and there was unhappiness between your employees about the salary increase, especially on the pilots raise, but then with the rising inflation that actually could grow. So how do you see the situation there, what sort of things you need to do? Would that add pressure to the costs? So these are two questions if you could talk about, please.

Ronojoy Dutta — Chief Executive Officer

Okay. So first on the network. And the network, as you know, and this is not new, there has been a shift in the sense that like three, four years ago, it was all about, oh, metro to metro is so profitable, these are our best routes and everyone is like piling into metro to metro. That has clearly changed. Metro to metro is still strong but metro to non-metro, as you’ve said, is getting stronger. Now within metro to metro, though, a huge part of it is corporate travel and I’m pleased to say that corporate travel is coming back.

Yes, we took a sharp hit, but everything says they’re coming back and therefore metro to metro profits are also increasing. Metro to non-metros, we have a lot of unique stations that we’ve gone into. Therefore, we have a lot of unique segments. And so that by itself is good. Within that also, metros are so well positioned that if you’re going from — I’ll just make this up, if you’re going from Bhubaneswar to Surat, we will give you six different ways of getting there at five different times of the day. That’s a huge advantages for us in terms of yield.

So if you look at pricing then, clearly everyone prices to match. And 90 days out everyone is matched, 60 days out and everyone is matched and then 15 days out everyone is matched. The question is which airline is getting a higher proportion of the 90-day pricing and which airline is getting a higher prefer the 15-day pricing. That’s where advantage comes in. Because of everything that I’ve mentioned, service, network et cetera, we tend to get more of the 15-day pricing.

All of this is a network yield game and the sort of unique, strong network results in the higher yield. International. International, yes, the markets to the Middle East are very strong for everyone, I’m sure. Now within that, what are our advantages? You mentioned Emirates. Well, Emirates will have a certain number of seats, but they are looking at more towards the beyond. So they are pricing in such a way as to get more and more to beyond connection. We are pricing in the local market and that’s where we have a strength with the narrow-body, we do quite well and therefore, the Middle East looks good. I think that’s what you are asking on international in specific.

Now, I’ll switch to the employee side. Look, our overall strategy is engage with the employees, focus on the employees. If we do that, the employees in turn will focus on the customers, and if they do that the customers in turn will create shareholder value. So, it really is a chain of doing everything right for the employees, not just pay, in terms of working conditions, engagement, all of that, so that we get better customer service, so that we get shareholder value. We are in an inflationary environment, we have gone through a very difficult period, first of pay cuts and then not full restoration of pay, and we know we have to address this issue. But as we say, [Foreign Speech] we do -have a big loss. So much as we just like to give everyone pay raise, we have to take into account the sort of losses that we are piling up. So we have to manage this very carefully. But I will say this, our heart is with the employees. We want to do the right thing for them, we’d love to give them more pay raises. Our heart is with them, but our head has to work in terms of, let’s be profitable.

So overall, I think our employees have been resilient. I think, they are extremely loyal. We take all these surveys and I think they understand. So again, it’s not easy walk in the park. It’s something we have to manage very carefully, but we’d like to do the right thing for our employees.

Achal Kumar — HSBC — Analyst

Right. Sorry Mr. Dutta, I was actually — Emirates was an example which I’ve referred to. I wanted to understand the overall international network on the Southeast Asian countries, on North Asian countries and all. So Emirates was just an example which I gave.

Ronojoy Dutta — Chief Executive Officer

Okay. So let’s talk of our international strategy. The fact is India is surrounded by strong hubs, which carry a lot of connecting traffic. And what we have discovered through the COVID process is the incredible amount of charter demand we got for point to point. And we are like, how did these people get to these before COVID and the shutdown and so forth? And the answer is, they all went one-stop.

Well, if there’s so many one-stop, we obviously have a unique opportunity to go non-stop. And I will just make up some example. Let’s say, you are trying to get to Bali, or you are trying to get to Manila, or you are trying to get to Hamburg, how do you get there? Well, you get there one-stop on someone, with a three-hour stop layover, etcetera, etcetera. And we want to do all this non-stop. So we’re looking for all these opportunities.

COVID has given us a great learning and feedback into — insights into markets. And we are eager to go as soon as we have some more aircraft available. So right now we are quite hungry for aircraft. As I said before, our count is not going up, we’d like to increase the count. But I also want to stress the code-share rule applicability to all of this. And you look at Doha, you look at Istanbul, all these connections, where the other side is flying passengers and then connecting to our network, that is a very profitable business for us as well. So, international has always been margin-wise better, it will continue to be margin-wise better.

And to Southeast Asia, yes, it is more challenging right now, but I think it’s temporary, whether it is Thailand or Malaysia, softer to build up, but [indecipherable].

Operator

Thank you. Mr. Kumar, may we request that you return to the question queue for follow-up questions. The next question is from the line of Mohit Adnani from CRISIL. Please go ahead.

Mohit Adnani — CRISIL — Analyst

Yes. Thank you. I wanted to understand, has the booking cycle moved — has the booking curve sort of expanded than before? Because I remember seeing in — hearing in one of the con calls that because the pandemic in FY ’21 and FY ’22, India had moved from already a shorter booking cycle to even shorter, because people are not sure what the condition would be. But do you see it going back to pre-COVID levels now or even say further, because since the D15 fare cap is still there and fares are high, are we seeing people booking more in advance than before?

Gaurav Negi — Chief Financial Officer

Yes. So the booking cycle has almost become the same as we it used to be, the pre-COVID level and we are seeing almost similar kind of booking patterns. More so with the 15 days pricing which is right now currently enforced by the government. So we are seeing the bookings cycle getting back to the pre-COVID level. What is also happening is on the international side, we are seeing even better than the pre-COVID level as far the advanced bookings are concerned. So we are seeing a higher percentage of the people booking in advance, 30 days out, compared to what they were doing prior to COVID.

Mohit Adnani — CRISIL — Analyst

Okay. And I just had a quick follow-up — not exactly a follow-up. I want to know that with three recent incidences of the CFM engine having shut down, and the DGCA having taken notice of that, do we foresee any delay in receiving the new 320neos which are going to be powered by the CFM engine set?

Wolfgang Prock-Schauer — President & Chief Operating Officer

This is Wolfgang here. So we don’t foresee any delays in how the aircrafts are delivered to us and I have to say in operations as we have the scale of operation an engine — engine shutdown is a normal case of — not normal in the way that we want to have it, but it happens from time to time. Yes, clearly, statistics will show that, but our crew is trained, our pilots are trained to handle such situations and we don’t foresee any changes in our fleet planning.

Mohit Adnani — CRISIL — Analyst

Thank you very much.

Operator

Thank you. The next question is from the line of Pramod Kumar from UBS. Please go ahead.

Pramod Kumar — UBS — Analyst

Yes. Thanks a lot for the opportunity. My question relates to the cargo business. Just wanted to —

Operator

Mr. Kumar, sorry to interrupt you. Please use the handset mode. The audio is not clear.

Pramod Kumar — UBS — Analyst

Is it better now?

Operator

Yes.

Pramod Kumar — UBS — Analyst

Yes. Well, thanks a lot. My question is pertaining to the cargo side. Given the recent announcement of a 50% yield joint venture with UPS, just wanted to understand some more details about it, in terms of whether — does it kind of — is it over and above your own freighter plans, and also is there any overlap for your existing — the freight what you carry on the passenger aircrafts, will it be also part of the joint venture? So to begin with that and I have a follow-up on the cargo side.

Ronojoy Dutta — Chief Executive Officer

So, first of all, the cargo arrangement between UPS and the Interglobe IGE Group, that has nothing to do with us. That’s a standalone operation. They have their own agreements. It has no impact on IndiGo whatsoever. We, of course, carry UPS — or we serve, not carry. We serve UPS, we serve FedEx, we serve DHL. So we are neutral to all of those and we try to do our best as we can by each one of those providers.

On our own, of course, we are quite bullish on the cargo business, and as you know, we have four freighters coming and cargo has done very well through the COVID period and we expect that to continue, but there is no relationship at all between what we’re doing on the cargo and what IGE Group is doing on their side.

Pramod Kumar — UBS — Analyst

Okay. So that’s good, Rono, for you to clarify, because I was wondering why there was no exchange filing from your side to this effect. So in a way, it’s kind of a — promoter is driving this business separately with UPS. But Rono, isn’t there a bit of a issue then because IndiGo itself has its own freight-out plans and so isn’t it a bit of issue there in terms of both promoter group companies competing for the business? I’m just a bit surprised.

Ronojoy Dutta — Chief Executive Officer

As I said, this will be totally arms-length. We do business with the UPS, we do business with FedEx, we do business with DHL and we will continue to do that. They have their own relationship, it has — really has no overlap and nothing to do with us. No sort of tentacles between the two companies.

Operator

Thank you. Mr. Kumar, may we request that you return to the question queue for follow-up questions. Next question is from the line of Iqbal Khan from Edelweiss. Please go ahead.

Iqbal Khan — Edelweiss — Analyst

Yes. Hi, sir. Am I audible?

Ronojoy Dutta — Chief Executive Officer

Yes.

Iqbal Khan — Edelweiss — Analyst

Yes, hi. Sir, I mean, talking about the cargo portion as well, can you please tell me, I mean, how much was the cargo revenue for this quarter? Like if I’m not wrong, last quarter contributed around 20% with total mix. So can you just give me the number on that and how do we see the corporate travel — corporate travel recovering? Has it been 100% of pre-COVID levels now? This is my first question.

Ronojoy Dutta — Chief Executive Officer

I’ll let Sanjay address the corporate travel piece.

Sanjay Kumar — Chief Strategy & Revenue Officer

Yes. So on the corporate travel side, we have seen a complete recovery of the pre-COVID level — at par with the pre-COVID level, especially in terms of March, we had almost 64% of recovery taking place on the corporate travel side. But now last two months, especially in the month of April and May, we are seeing pre-COVID level or even higher traffic than the pre-COVID level. So going forward, I think we are quite bullish about the corporate recovery as well as the business growing from the pre-COVID levels.

Ronojoy Dutta — Chief Executive Officer

In terms of cargo, yes, our year-over-year numbers show 31% growth. So, as I said, cargo is strong. And all the signs are that cargo will continue to be very strong forward.

Iqbal Khan — Edelweiss — Analyst

So how much was it in the overall revenue mix in this quarter?

Ronojoy Dutta — Chief Executive Officer

I don’t think we go into that level of detail. I’m sorry.

Iqbal Khan — Edelweiss — Analyst

Okay. And sir, just one — you mentioned that the capacity addition in first quarter was 2.5 times of the Q1 FY ’21 — FY ’22, is that correct? This is what I have heard.

Ronojoy Dutta — Chief Executive Officer

Yes, that is correct.

Iqbal Khan — Edelweiss — Analyst

And how much is it — and how much would you anticipate for the entire financial year ’23?

Ronojoy Dutta — Chief Executive Officer

We gave this number. What was —

Gaurav Negi — Chief Financial Officer

So, we will be around 50% to 60% higher than what we closed 2022 with.

Iqbal Khan — Edelweiss — Analyst

Okay. Cool, sir. Thank you, sir. That answers my question.

Operator

Thank you. The next question is from the line of Pulkit Patni from Goldman Sachs. Please go ahead.

Pulkit Patni — Goldman Sachs — Analyst

Sir, thank you for taking my questions. Sir, my first question is on yields. So we’ve obviously got that floor price which is just something that is supporting us. I guess, there should be some charters as well. Sir, just to get a sense, how much do you think of the yield that we are getting today could have a bit of artificial support because of these factors, or do you think these yields are absolutely pure yields, and even if the support goes, it shouldn’t have an impact? Anything that you can quantify there would be pretty helpful for us. That’s my question number one.

Ronojoy Dutta — Chief Executive Officer

Okay. So, look, yields — sorry, the pricing bands have a floor and they have a ceiling. For a long time, we were all sitting on the floor. Prices were doing what they were doing, but we were all sort of managing at the floors. Now they’re coming sharply up as well. They haven’t hit the ceiling at all, or anywhere near it, so there is still room to grow. But we are sort of now in between the ceiling and the floor.

Look, it’s impossible to give a scientific answer, you can only give a gut-feel answer. So my gut feel is that the Indian economy is strong, that there has been a structural shift in the way people think of air travel. People travel more, people who could afford it are spending more on travel and vacations, getting together with family. And people before who couldn’t afford it, now can afford it. And some of them can afford it because income levels have gone up, some of them can actually afford it because the employers are now paying for it, and some of them just sort of to do a trade-off mentally, I’m going from Jaipur to Chennai, and I can lose four days’ wages by train or I can pay a slightly higher fare on IndiGo. So I think there is a big structural shift of more people flying more often and substitution of air versus rail.

I think this is not only sustainable. I think it’s — we are just in the beginning of this phenomenon. So there is a long way to go in with. Everything that I’ve said, yes, it’s starting off, but boy, it’s got a long way to go. So I’m very bullish on aviation traffic and yields in India.

Pulkit Patni — Goldman Sachs — Analyst

And sir, international charters, does this still form part of the —

Ronojoy Dutta — Chief Executive Officer

Fewer and fewer, as international has opened up, we’ve moved from charter to schedule. But international, again, there’s a lot of room for growth. I mean, again, as I keep saying, look at the traffic between Milan and Delhi and how the hell does it get here? It’s not nonstop on anybody. It’s all coming through Goa and Dubai and whatever else. And it’s like, come on, let’s get a plane and fly Delhi-Milan. So there’s lots of opportunity here on this.

Pulkit Patni — Goldman Sachs — Analyst

Sure, sir. Sir my second question, more of an observation, I mean, to one of the previous questions you mentioned that this UPS JV is with the IGE Group. But the fact that we are also getting into cargo, getting dedicated freighters at a time when this is a joint venture with the promoter, I mean isn’t it conflict of interest? I mean, if you could just explain this, how would it eventually work, because, obviously, we were very bullish about cargo which we are focusing on as a company. And at that time the JV happens with the promoter company. If you could just explain that a little better, it will be helpful.

Ronojoy Dutta — Chief Executive Officer

There is absolutely no conflict here. So we have — I don’t know — 100 shareholders, each of them do their own thing. Now if one of our shareholders wants to get into the cargo business, another shareholder wants to get into the shipping business, what concern is it of ours. And what does the shareholder expect us to do? Nothing, just ignore them. We’ll do our thing, they’ll do their thing. And also, again, I don’t know exactly what this is, but just knowing UPS, I’m guessing they’ll focus more on small shipments and service — travel — I mean, transportation. We won’t. We are looking at consolidated shipments, probably going international. So, hey, it’s like two ships passing in the night. We have nothing to do with each other. We don’t signal each other. We just ignore each other.

Operator

Thank you. Mr. Patni, may we request that you return to the question queue for follow-up questions. The next question is from the line of Joseph George from IIFL. Please go ahead.

Joseph George — IIFL — Analyst

Thank you. Is the audio clear?

Ronojoy Dutta — Chief Executive Officer

Yes.

Joseph George — IIFL — Analyst

Sure. Thank you. I have three questions. Firstly, what is the impact of rising interest rates on lease rentals? That is one. Second is, when I do the math with respect to utilization rates — expected utilization rates of aircraft for FY ’23 based on the fact that you’re guiding to a 55% growth in ASK without a significant increase in fleet size, so it comes to about 11 hours. I want to understand whether there is scope to increase this further, and given that your international share as we go ahead will increase compared to your own history, whether there is scope to increase the utilization beyond what we have seen in the past? That was the second question. I’ll take the third one after maybe the responses to the first and the second.

Ronojoy Dutta — Chief Executive Officer

Yes. So aircraft utilization, very good question. And yes, a lot of the growth is coming from increased utilization. And part of this is a domestic-international mix. The great thing about domestic-international is, domestic flies in the day, international flies during the night. So it just works mutually for us. If there is a objective target, feasible number we’re shooting for, we’d like to be at about 15.5 [phonetic] hours utilization. And we are a long ways from there. So a big part of this year-over-year growth is sort of high-end 70% growth and all that, a lot of it is just surely coming from utilization.

The next question, what is the impact of interest rates on leasing costs? So clearly there is a correlation. But as of date, we see still not large numbers where we see an impact and we are sort of booked far out. So it’s not like we’re doing leasing transaction for next year’s delivery. We have booked far out. So those deals are sort of done and sealed and signed. So for next few years at least we have no issues. But your point is well taken. If interest rates go to 16% or some huge number, would there be an effect on leasing? Of course, it will, but we are not seeing anywhere near — anything like that yet.

Joseph George — IIFL — Analyst

Understood. So just to get a clarification, so the current lease rentals are all locked in at a particular interest rate not governed by variable rates, sir?

Ronojoy Dutta — Chief Executive Officer

I don’t want to say all or nothing. Most of them are in active negotiations, but we don’t do leasing arrangements for the next 6 months. We do them 2 to 3 years out. So yes, a huge bulk of them are all done.

Joseph George — IIFL — Analyst

Understood. The last question that I had is, you’ve guided for a 55%, 60% growth in ASK. That number sounds very good because we are going to be much higher than our pre-COVID levels. I wanted to understand what is the confidence level on maintaining load factors and yields? I mean increasing capacity was 55%, 60% is one thing, but doing that while maintaining load factors at optimum levels, maybe be north of 80% and sustaining high yields, how do you see that playing out?

Ronojoy Dutta — Chief Executive Officer

So again, it’s a full package that I want to talk about. I’ll repeat everything that I’ve said in different questions. Indian economy, very strong; Indian aviation, lots of opportunities around just international; IndiGo’s position in terms of high customer service and therefore, disproportionate share of revenue, very strong; the dynamics of the Indian aviation of more people traveling, more people traveling, more frequently, more people willing to pay a higher price, very strong. So when I put this — all things together, what is the confidence level? Very, very high.

Joseph George — IIFL — Analyst

Got it, sir. Thank you.

Operator

[Operator Closing Remarks]