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InterGlobe Aviation Ltd., the parent company of IndiGo, a prominent Indian low-cost carrier, reported its financial results for the third quarter of fiscal year 25 (Q3 FY25). While the airline experienced a significant increase in revenue and passenger numbers, reflecting the robust demand for air travel within India, the net profit for the quarter exhibited a notable decline. The reported net profit of Rs 2,449 crore represented an 18% decrease compared to the Rs 2,998 crore recorded in the same period of the previous year. This decrease, despite the positive indicators of continued strong passenger demand, underscores the impact of rising operational costs and inflationary pressures on the airline's profitability.
The robust profit achieved in the corresponding quarter of the previous year (Q3 FY24) can be primarily attributed to the timing of the major festival season travel. The October-December period in FY24 saw a surge in travel related to Diwali and other significant festivals, which did not align with the same period in FY25. This timing difference significantly influenced the year-on-year comparison of profitability. Despite this difference, the company demonstrated impressive revenue growth, with a 14% surge to Rs 22,111 crore, compared to Rs 19,452 crore in Q3 FY24. This increase was driven by a healthy growth in both available seat kilometers (ASK) and revenue passenger kilometers (RPK), showcasing continued expansion in operational scale and passenger uptake.
A crucial factor impacting the net profit margin was the significant increase in operating costs. The cost per available seat kilometer (CASK), excluding fuel, experienced a sharp 23.1% year-on-year rise, reaching Rs 3.25. This increase highlights the challenges posed by inflationary pressures affecting various aspects of the airline's operations. Higher operational costs, encompassing maintenance, airport charges, and staff salaries, contributed significantly to the overall cost increase. Furthermore, depreciation and amortization expenses also escalated by 33.6% during the quarter, further impacting profitability. While the airline's EBITDAR (earnings before interest, tax, depreciation, amortization, and rent) still saw a 10.7% increase to Rs 6,059 crore, the corresponding EBITDAR margin decreased by 70 basis points to 27.4%. This underscores the challenge of balancing revenue growth with escalating operational expenses.
Despite the challenges faced, IndiGo continues to maintain a dominant market share within the Indian aviation sector. The airline carried 273.25 lakh passengers during Q3 FY25, securing a 63.8% market share – a slight improvement from the 62.1% share in the corresponding period of the previous year. This demonstrates the airline’s enduring appeal among Indian travelers, despite the competitive landscape. The financial strength of IndiGo is also evident in its strong cash reserves. As of December 31, 2024, the company's total cash reserves stood at Rs 43,781 crore, representing a 35% year-on-year increase. Free cash flow also grew significantly, increasing by 50.5% to Rs 28,904 crore. However, the debt also rose by 27.3% year-on-year to Rs 65,139 crore, largely due to capitalised operating lease liabilities, highlighting the significant capital investments required to support the airline's growth and expansion plans. This suggests a strategic focus on fleet expansion and operational growth to meet the demands of the expanding market, even though it increases debt.
In contrast to the strong performance of Q3 FY25, the airline had reported a net loss of Rs 987 crore in the preceding quarter (July-September). This earlier loss was primarily attributable to a sharp increase in airport fees and charges, aircraft repair and maintenance expenses, and fuel costs. The contrast between Q2 and Q3 performance underscores the volatility within the airline industry and the sensitivity of profitability to fluctuating operational costs and external factors such as seasonality. The comparison of Q2 and Q3 results highlights the importance of effective cost management and the ongoing challenges in navigating the complexities of the Indian aviation market. The overall performance of IndiGo in Q3 FY25 demonstrates a mixed picture. While the airline is clearly capitalising on the sustained growth in air travel demand in India, effectively managing operating costs and mitigating inflationary pressures remain critical to enhancing profitability in the coming quarters.
The IndiGo share price has responded positively to the company’s overall performance. Over the last year, the share price has shown significant appreciation, gaining more than 42%, leading to a market capitalization exceeding Rs 1.6 lakh crore. This signifies investor confidence in the long-term prospects of IndiGo despite the short-term challenges faced. The positive stock market response suggests that investors are optimistic about the company's ability to navigate the current challenges and capitalize on the long-term growth potential within the Indian aviation sector. The future performance of IndiGo will depend on its ability to manage its costs effectively while continuing to expand its operational capacity to meet the growing demand for air travel in India. The company's strategy for mitigating the effects of inflation and managing its debt load will be crucial factors that will affect its bottom line in the future.
The financial results of IndiGo in Q3 FY25 provide a valuable insight into the dynamic nature of the Indian aviation sector. While the company has showcased resilience and growth in several areas, significant challenges remain in managing costs and maintaining profitability in the face of inflationary pressures and fluctuations in operational expenses. The long-term success of IndiGo will depend on its capability to adapt to these dynamic market conditions and maintain its market leadership position in a highly competitive industry.