India’s largest airline said it has incurred a one-time cost of ₹570 crore on compensations after cancelling more than 5,000 flights in early December amid a pilot shortage following the implementation of new rest rules. It also made an additional provision of ₹969 crore towards restructuring the salary structure in line with the new rule.
Under the new structure, the share of basic pay has gone up, increasing the amount to be paid towards provident fund, gratuity and pension.
Without the total exceptional items worth ₹1,546.5 crore, the company’s net profit would have stood at ₹2,096.3 crore.
Ongoing Investigation
InterGlobe Aviation, the 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 domestic skies, said it is strengthening its internal systems to avoid a repeat of such disruptions even as an internal investigation to find out the exact causes for the disruptions is ongoing. “There will be certain long-term measures we will take as one learns from every crisis,” IndiGo CEO Pieter Elbers said. “We are looking at international airlines which have faced such disruptions and what were their learnings from that. 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 buffer, and effectively implement the new pilot rest hour provisions. DGCA said an overriding focus on maximising utilisation of crew, aircraft, and network resources significantly reduced roster buffer margins of IndiGo. IndiGo’s revenue from operations for the quarter climbed 6.2% to ₹23,471.9 crore, up from ₹22,110.7 crore in the same period last year. Yield, a marker of profitability, however, declined by 1.8% as the airline was hit by a slide in occupancy in its flights following the December meltdown.
STRIKING A POSITIVE NOTEThe airline’s management tried to strike an optimistic note for its investors even as it pared its growth forecast and said its costs will increase due to reduced operations. The airline will increase capacity by only 10% in the January-March period as compared to the high teens growth it witnessed in previous quarters.
The growth will primarily come from international operations as DGCA has implemented a 10% cut on IndiGo’s planned domestic schedule, curbing its ability to increase flights.
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