IndiGo, India’s largest airline by market share, has reported a wider loss for the fourth quarter as high fuel prices have nullified the gains caused by the return of normality from Covid restrictions and an increase in flight bookings.
Jet fuel prices in India have so far increased ten times this year. The prices are revised on the 1st and 16th of every month based on the average international price of benchmark fuel in the preceding fortnight. From January 1 onward, prices have increased every fortnight and the steepest increase happened on March 16 (18.3%).
Fuel prices have been cumulatively increased by 49 rupees a liter this year and the Russia-Ukraine war has worsened the situation.
For the quarter ended March 31, InterGlobe Aviation, the holding company of IndiGo airline, reported a consolidated loss of 16.82 billion rupees (US$ 216 million), as against 11.47 billion rupees in the same period last year. Fuel prices during the fourth quarter are 61% higher when compared with last year, the airline said.
However, the airline’s revenues look much better in the wake of pent-up demand after two years of pandemic restrictions and increased capacity. InterGlobe’s consolidated revenue from operations increased 29% to 80.21 billion rupees this quarter as against 62.23 billion rupees last year.
InterGlobe’s aircraft fuel expenses soared 68.2% to 32.21 billion rupees in the period, while total expenses surged 31.5%.
IndiGo CEO Ronojoy Dutta said, “Although traffic rebounded and demand was robust during the latter half of the quarter, we were challenged by high fuel costs and a weakening rupee.”
IndiGo is best positioned to maximize revenue in a recovering market, he added.
And, indeed, the airline industry in India has been basically on the mend since the government lifted restrictions following a drop in coronavirus cases. The resumption of scheduled international flights from March 27, after a gap of two years, has further boosted the prospects. Numerous international airlines are in the process of resuming flights from India.
In India, the airline sector is witnessing a buzz with Tata Group acquiring state-owned Air India and some new players planning to enter the industry. After the acquisition, Tata Group airlines, comprising Air India, Alliance Air, Vistara, and Air Asia, have a combined market share of 28%. IndiGo currently has a market share of 51%.
Billionaire stock trader Rakesh Jhunjhunwala is planning to start a low-cost airline, Akasa Air. He placed an order for 72 Boeing 737 MAX jets for his proposed venture. The airline will get its first lot of aircraft next month and hopes to start scheduled flights in July.
Defunct airline Jet Airways is also close to resuming flights under its new owners, UK-based Karlock Capital Partners and UAE-based businessman Murari Lal Jalan. They took over the grounded airline in June 2021 and have secured all the necessary clearances from the civil aviation watchdog Directorate-General of Civil Aviation. The airline will start commercial flights in the July-September period after a hiatus of three years.
However, market experts fear a long-drawn fuel hike will dampen the revival of India’s civil aviation business. Since Russia invaded Ukraine, global crude oil prices have been above $100 a barrel.