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India’s biggest airline IndiGo, with a 37 percent market share, has recorded a 52.6 percent growth in net profit in the just concluded fiscal 2016 over the previous year; marking its eighth consecutive year of profitability. This is a feat no other Indian airline has been able to achieve thus far.
In the fiscal ended March 31, IndiGo reported a profit of Rs 1,989.7 crore, which according to the airline’s president and whole-time director Aditya Ghosh is its “highest ever yearly profits”. In FY15, the airline has reported a profit of Rs 1,304.17 crore.
A key factor to the airline’s profit growth has been a 17 percent decline in fuel costs, which at the end of FY 16 stood at Rs 4,779.3 crore as against Rs 5,748.4 core in FY15.
In India, fuel costs account for around 50 percent of an airline’s total expenses. Hence, any slide in crude prices gives a fillip to an airline’s profitability. The price of brent crude has fallen from a high of $ 70 a barrel in May last year to below $35 a barrel in January this year. Currently, the price of brent crude is about $48 per barrel.
For FY16 IndGo’s fuel costs accounted for 35 percent of its total expenses, while in FY15 it was 46 percent. The airline’s revenue for the financial year under review grew by 15.9 percent to Rs 16,139.9 crore from Rs 13,925.33 crore in the previous fiscal.
“We have started getting deliveries of A320neos. The A320neos powered by Pratt and Whitney’s fuel efficient geared turbo fan engines will enable us to structurally reduce our costs as fuel continues to be the single largest element of our cost structure,” said Ghosh.
On a quarterly basis, the airline reported a year-on-year net profit and revenue growth of 0.3 percent and 7 percent, respectively, in the January to March period. While net profit increased to Rs 579.3 crore from Rs 577.33 crore, revenue grew to Rs 4,090.67 crore from Rs 3,823.2 crore.
In the preceding October to December quarter, the airline had reported a net profit of Rs 657.28 crore and revenue of Rs 4,297.75 crore. Typically, this quarter is good for airlines on account of the year-end holiday season. In comparison, the January to March quarter is more challenging.
IndiGo, which has a market capitalisation of $5.81 billion, got listed on the Indian bourses in November last year. On Friday, IndiGo’s shares ended the day at Rs 1,072.15 a piece, up 0.84 percent over the previous day’s close. Its shares though are up by 40 percent over its November list price of Rs 765.
Furthermore, the airline announced a divided of Rs 15 share in the fourth quarter ended March 31. “Including the interim dividend issued prior to the IPO, IndiGo has distributed Rs 42.83 per share for the fiscal year 2016 based on the shares outstanding at the year end,” read a company statement.