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IndiGo beats the blues

IndiGo beats the blues

the carrier’s first profitable quarter in nearly two years was met with aplomb by the markets
February 13, 2022
3 min read
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the carrier’s first profitable quarter in nearly two years was met with aplomb by the markets

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while the Covid-19 pandemic has had a varying impact on many sectors of the business world. some have gone down then up, others up then down, but airlines are among those few that have gone down and stayed down. this is reflected in the fact that IndiGo Airlines, India’s largest carrier, had reported seven consecutive quarters in the red. that is until its recent report for Q3 FY22 (October to December 2021) which bucked the trend and registered in the green. this resulted in its stock price rocketing 10% as investors were attracted to a bright spot in a bleak market.

can IndiGo keep flying high?

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the airlines reported a consolidated net profit of Rs 129.8 crore in the December quarter, having made a loss of Rs 620.14 crore in the corresponding year-ago period. it was also a marked improvement from the Rs 1,435.6 crore loss reported in the prior quarter ie. Q2 FY22.

there were two main factors behind this rise. firstly, the opening up of the economy with the removal of virtually all pandemic-related restrictions, leading to the realisation of immense pent-up demand for travel. secondly, the festive period which is usually accompanied by an increase in air travel. this was further supplemented by the government removing the cap on the passenger capacity per flight in mid-October, close to the beginning of the reported quarter. this led to increased utilisation of IndiGo’s deployed fleet and thus a shift towards profitability.

further the Omicron variant of the Covid-19 virus which caused a surge in cases across the globe only became a major issue in India close to the end of December. so the financial report perhaps accounts for the most favourable period that IndiGo has had in the past couple of years.

even that scare seems to have abated, with Omicron not proving to be nearly as deadly as initially feared and vaccine coverage constantly on the rise. unless there’s the emergence of a new variant that upends the world again, this might just be a flight path on which IndiGo continues. the one variable to watch out for, however, is the price of crude oil which is on the boil and a major item on the balance sheet for any air carrier.