IndiGo Q4 profit falls 25% on higher fuel costs

IndiGo to Buy 50 ATR Planes For $1.3 Billion
IndiGo To Launch Regional Operations with Up to 50 ATRs

13 May, 2017

The purchase signalled the airline's intention to bid next month for a series of new regional routes being auctioned by the government.

IndiGo is expected to be part of UDAN scheme.

IndiGo, now an all-Airbus operator, will use the ATRs to build a regional network in India as the government pushes to boost local economies by connecting small and remote cities.

The company, which runs the IndiGo airline, notched up revenues of Rs 4,848.2 crore in Q4FY17, an increase of 18.5% on-year basis but a substantial jump in fuel costs (71%) and higher rentals drove down profits. Under the so-called term sheet signed between IndiGo and ATR, the airline can reduce the number of airplanes delivered "under certain conditions".

"In support of our Honourable Prime Minister Shri Narendra Modi's UDAN vision, we are embarking on a journey to build a nationwide regional network and connect cities that have not benefitted from the growth in Indian aviation", said IndiGo president Aditya Ghosh.

ATR values the potential order at $1.3 billion. The airline is now preparing for an ambitious development of its regional footprint.

Christian Scherer, ATR's Chief Executive Officer, declared: "IndiGo is one of the most respected, efficient and demanding airline in the world". The current fleet size of the airline stands at 131 narrow-body aircraft from Airbus and the management indicated that the total capacity will increase to 170 aircraft by March 2018.

The first round of bidding in March saw five airlines awarded contracts for new flights between large cities and 70 small towns, almost half of which have never been reached by plane before.

TruJet has already announced plans to add more routes after initial success, while Alliance Air's flights to Shimla from Delhi are sold out for the next two months.

Aviation think tank CAPA said that while the ATR order is not surprising, it is possible to see this operating under a separate subsidiary. "IndiGo does not have any working capital debt".

The carrier has faced operational issues with some A320neo aircraft due to problems with engines built by Pratt & Whitney, a unit of United Technologies Corp. Air India and Jet Airways also have smaller planes in their fleets.

The ATR 72-600 comes with 68 to 78 seats and has a range of 900 nautical miles (1,665 kilometers). In the quarter ended March 31, Indigo registered a profit of Rs 440.30 crore, down 24.6 per cent from Rs 583.78 crore the year before.

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