IndiGo hopes to take fresh measures to reduce cost

Thursday, June 10, 2021

IndiGo, recently reported a fifth consecutive quarterly losses due to the ongoing pandemic, hopes to take several fresh measures to reduce costs. These measures include bringing down fuel costs by inducting more fuel efficient aircraft, retiring older aircraft, and re-negotiating aircraft ownership costs with lessor.

The airline had since the beginning of the pandemic last year laid off about 15% of its staff, implemented salary cuts and leave without pay for staff, and renegotiated existing contracts with vendors.

As a result, the airline’s total yearly expenses fell by 42.8% during FY 2021 as compared to the previous fiscal. However, IndiGo continued to incur a cash burn of ₹19 crore a day during the recently concluded March quarter, up from ₹15 crore a day during the previous quarter.

The airline’s cash burn is expected to increase during the June quarter, Motilal Oswal Institutional Equities said in a recent report.

It added that the cash burn is expected to be higher in 1QFY22 as daily passenger demand falls to about 80,000 passengers from the highs of about 300,000 at the end of Feb’21. During the coming months, the airline will retire more A320ceo planes and replace them with more fuel efficient A320neo planes, apart from inducting A321neo planes.

The airline has replaced 25 A320ceo with more fuel efficient A320neo planes so far and plans to induct at least 20-25 A321 planes during FY 2022, a company spokesperson said.

The airline’s cash burn is expected to increase during the June quarter, Motilal Oswal Institutional Equities said in a recent report.

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