Evening, ladies and gentlemen, and welcome to IndiGo's Conference Call to discuss the Third Quarter of Fiscal Year 2022 financial results. My name is Aman, and I'll be your coordinator. At this time, the participants are in listen only mode. A question and answer session will follow today's management discussion. As a reminder, today's conference call is being recorded. I would now like to turn the conference to your moderator, Ms. Richa Chhabra from the investor relations team of IndiGo. Thank you, and over to you, ma'am.
Good evening, everyone, and thank you for joining us for the Third Quarter of Fiscal Year 2022 Earnings Call. We hope that you and your families are safe and in good health. We have with us our Chief Executive Officer, Ronojoy Dutta, and our Chief Financial Officer, Jiten Chopra, to take you through our performance for the quarter. Wolfgang Prock-Schauer, our Chief Operating Officer, Sanjay Kumar, our Chief Strategy and Revenue Officer, and Kiran Koteshwar, our Head of Investor Relations and Sustainability are also with us and are available for the Q&A session. Before we begin, please note that today's discussion may contain certain statements on our business or financials which may be construed as forward-looking. Our actual results may be materially different from these forward-looking statements.
The information provided on this call is as of today's date, and we undertake no obligation to update the information subsequently. A transcript of today's call will also be archived on our website. We will upload the transcript of today's prepared remarks by day end. The transcript of the Q&A session will be uploaded subsequently. With this, let me hand over the call to Rono Dutta.
Thank you, Richa. Good evening, everyone, and thank you for joining the call. Hope all of you are safe and doing well. We released our third quarter fiscal 2022 results today, and I'm pleased to announce a net profit of INR 1.3 billion for the quarter ending December 2021, as compared to a net loss of INR 14.4 billion for quarter ending September 2021, and a net loss of INR 6.2 billion for the quarter ending December 2020. Decline in COVID cases and removal of capacity restrictions resulted in buoyant traffic numbers. We were encouraged to see how rapidly the domestic traffic reverted to pre-COVID levels during the quarter. We added capacity to take advantage of the ongoing recovery, and we are pleased to see our efforts culminate into a profitable quarter.
First, I would like to take you to the key highlights for the December quarter and then provide some insights on the impact of the new COVID variant on our performance in the current quarter. Within the quarter, October was a relatively weak month, but we saw strong momentum building through November and December. During the latter part of December, revenue started declining because of Omicron. If this had not been the case, we would have reported even better performance. Overall, we achieved strong pricing levels and high load factors of about 80% during the quarter. While international capacity is still restricted, traffic showed particular strength. With the gradual addition of bubble flights, international capacity deployed grew by almost 80% quarter-over-quarter, and bookings grew by 95%.
System-wide, we deployed approximately 45% more capacity sequentially, reaching to about 88% of our pre-COVID capacity for the quarter and about 97% of our pre-COVID capacity in the month of December. Our load factors have increased to 79.7% in the December quarter, compared to 71.1% in the September quarter. Yields have increased by 5.2%. These drivers led to a RASK improvement of 13.5% sequentially to INR 4.09. Higher yields and higher capacity deployment have resulted in a sequential revenue growth of 63.5%. Moving to the cost side. We reported a CASK of INR 4.03, which is 10.7% lower sequentially in spite of increased fuel costs. Higher capacity deployment has helped reduce our unit cost. Fuel continues to be a significant headwind.
As a result, the fuel CASK went up by almost 13% on a sequential basis. In line with the fleet modernization program, we continue to replace the ceos with neos. During the December quarter, we inducted 18 fuel-efficient neos and returned 16 ceos. We remain firmly on the path of returning most of our ceos by the end of December 2022. Towards our long-term goal of enhancing our global footprint, we also signed a codeshare agreement with Air France-KLM, our fourth arrangement with an international carrier. This is a two-way codeshare agreement and will help us increase connectivity and gain access to new markets. We are confident that such partnerships will improve IndiGo's reach to new markets and customers once the international operations normalize.
Before we talk about current market conditions, I would like to pause and thank all our employees for providing exceptional service to our customers during the difficult calendar year. In 10 out of 12 months during calendar year 2021, IndiGo was positioned as number one in on-time performance as a result of our employees' efforts. Now let me talk about the current market condition. In response to increase in COVID cases, we have reduced our operations to stay in line with declining demand. We are expecting that the capacity deployed in the fourth quarter of fiscal 2022 will be reduced by approximately 10%-15% as compared to the third quarter of fiscal year 2022. We think that load factors for the Q4 could possibly be weaker than the third quarter.
We are clearly in a volatile environment, and we are reviewing our bookings and capacity deployed on a daily basis. Unfortunately, we are experiencing a bit of an unpredictable environment, with traffic recovering and declining lockstep with the COVID cases. While we are going to see declining revenues for the fourth quarter, the experience of other countries leads us to believe that we are likely to see a recovery take place again in the first quarter next year. In summary, we are particularly pleased that we are able to report a profit for the quarter for the following four reasons. First, it demonstrates that the fundamentals of aviation in India remain strong, and once we are able to put the pandemic behind us, we should be able to return rapidly to a path of profitable growth.
Two, it validates our core belief that higher employee engagement results in higher levels of customer service, which in turn manifests itself in better revenue performance. Whether it is group fares or charters or individual bookings, we are positioning ourselves as the preferred airline because of our superior service. Three, international revenues continue to be very robust, and this augurs well for our future growth. Finally, four, the essence of our business model with its emphasis on cost leadership and reliability has served us well even in these uncertain times. We are looking forward to the next financial year with optimism and with a steely resolve to make sure good times are ahead for all of us. With this, let me hand over the call to our CFO, Jiten Chopra.
Thank you, Rono, and good evening, everyone. I hope that all of you are keeping safe and healthy. For the quarter ended December 2021, we reported a net profit of INR 1.3 billion compared to a net loss of INR 14.4 billion for the quarter ended September 2021. We reported an EBITDA of INR 20 billion compared to an EBITDA of INR 3.4 billion in the quarter ended September 2021. In the December ended quarter, we operated at 88% of our pre-COVID capacity. This higher capacity deployment has helped us to further improve our performance metrics. Some of the key measures of the reported quarter are as follows.
Our RASK increased by 13.5%, driven by a sequential increase in load factor by 8.6 points and in yields by 5.2% to INR 4.4 sequentially. As we deployed 45.2% additional capacity, our CASK ex-fuel reduced by 19.9% sequentially to INR 2.6. We still have substantial headroom for absorbing our fixed costs by increased international and domestic operation. Our fuel CASK increased by 13.2% sequentially, driven by increasing ATF prices. The update on our cash position is as follows. We ended the December quarter with free cash of INR 78.1 billion, net increase of INR 14.6 billion as compared to September end.
Our total cash as at 31 December 2021 was INR 173.2 billion. We continue to monitor ever-changing market conditions and will respond in an appropriate manner whenever necessary. We are thankful to our employees who have kept up their spirits during the difficult days. In line with the better performance in third quarter, we have rolled back certain employee cost measures. On the other key balance sheet numbers, we ended the quarter with capitalized operating lease liability of INR 307.6 billion and total debt, including the capitalized operating lease liability of INR 351.5 billion. Our ROU asset at the quarter end was 202.8 billion rupees. The key to overcoming current pandemic condition is largely in maintaining our cost leadership position.
We are striving each day to improve on cost matrices and looking at innovative ways to further capitalize on this trend. With this, let me hand it back to Richa.
Thank you, Rono and Jiten. To answer as many questions as possible, I would like to request that each participant limit themselves to one question and one brief follow-up question if needed. With that, we are ready for the Q&A.
Thank you very much. Ladies and gentlemen, we will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, if you will wait for a moment while the question queue assembles. The first question is on the line of Binay Singh from Morgan Stanley. Please go ahead.
Hi, team. Thanks for the opportunity. I just wanted to understand the operating leverage point that you highlighted a bit better. Firstly, when we look at the ASKM for the quarter, like, given your fleet size, how much more can it be from the current level? Just to understand that, you know, what is the utilization rate of the fleet?
The second is, when you talk about operating leverage, outside of lease rentals, which are the other line items where you would call out that, you know, in a normalized year that you could see a big operating leverage? Thanks.
Okay. On the capacity, as we said, I think in our release, our utilization is at about 10.7 or so. We can easily go up to 13.5 hours of utilization. There's still a lot of headroom left in terms of increasing our capacity. However, it also requires international relaxation of restrictions. It's tough to get to 12, 13 hours just domestic only because you're only using it during the day, basically. International needs to open, and then we'll be at 13.7 hours. In relation to what is the advantage of more capacity on unit costs, most of our costs, as you probably know, are really variable. Fuel, employees, I would say, landing costs, et cetera, et cetera. The fixed costs are in what?
They are in lease , they are in a lot of IT, digital, it's in the network. Those sort of costs are mostly fixed, but a very small portion overall. We need a fair amount of capacity to really bring the unit costs down. That's assuming that the employee costs are variable, when in reality they're not. They're semi-variable, if you will. You're right, most of the costs are variable at the end of it.
Just a follow-on question on, you know, fuel per ASKM. Assuming fuel prices remain where they are, we'll see two trends. You know, one is that the share of neo in the fleet will go up, which is positive for fuel per ASKM. But at the same time, will it be fair to assume that you may not be utilizing your ceo fleet fully today? So if you actually utilize the whole fleet, you know, we may not really see much change in fuel per ASKM versus where we are today, even if, you know, the entire fleet moves to neo. Any comment on that?
Clearly the switch from neo to ceo is a big, big driver. Really all the ceo will be gone by the end of the calendar year 2022. Now as to what is fuel consumption and what are the drivers, engines are one big driver. Along with that, the way we operate the airplane is a big driver as well. Our flight operations has been very, very active in making sure that they fly differently, if you will, with a package of ways. One is shorter routes, one is, as you know, most of the consumption happens in descent, and trying to manage all those procedures helps a lot. The flight operations people are very active in reducing fuel burn itself. Finally, I would say we also have good purchasing power.
We do tend to pay a slightly lower rate than the rest of the industry, we think, in terms of fuel price. All three of those are factors which determine our fuel consumption. I would have to say you're right. Over the last three, four years, one of IndiGo's best performance has been the way it has reduced fuel costs for ASK.
Great. Thanks, team. I'll come back in the queue.
Thank you. Our next question is from the line of Pulkit Patni from Goldman Sachs. Please go ahead.
Yes, thanks a lot for taking my questions. Rono, two questions. Firstly, if you could just touch upon the international bit a little bit more. I mean, given the fact that we don't get too much data since, you know, these are mostly bubble flights. If you could just talk about where we are in terms of, you know, capacity or any numbers you could share, you know, in the current scheme of things, how is the international business? What size are we operating today? That will be my question number one.
Okay. International is quite restricted on total amount of departures, but quite buoyant on the traffic numbers. Again, because the margins are much better internationally, the yields are better internationally. Now where are we flying? Bubble flights are being allowed mostly to the Middle East. Dubai, all of U.A.E., Doha, Kuwait. Recently Saudi Arabia opened up, which is a positive for us. We are constantly in touch with the government, looking for more international relaxation. You know, our domestic revenues exceeded pre-COVID levels. International is the part in terms of overall revenues that brought us down. Again, it's because of capacity, not because of the market condition. Market conditions actually are very attractive.
You know, I have to say that we see a couple of trends, which are very encouraging for the future. As you know, domestically, we have been growing, and we've grown particularly in the smaller cities, and we see a lot of revenue strength there. That says, hey, as we keep growing and we keep growing in the smaller cities, that should have more tailwind. At the same time, international is performing better than it did before the COVID in terms of absolute, you know, yields and margins and so forth, although capacity is restricted. Now, as capacity opens up, we don't expect to get such high yields. Clearly, those two things will work in reverse directions. Overall, international is very attractive to us right now.
I see those two as being tailwinds for us as we go forward, smaller cities and international growth.
Sure. No, actually, international yield actually came as a surprise to us as well. My second question is on employee costs. You know, you spoke about rolling back some of the cost-cutting measures, but at the same time we are seeing this increased competition coming into the market. Is there a possibility that this number could look a lot higher in future for you to retain? Plus, is there also a possibility that some of the sort of cuts that were taken place, you know, during peak COVID periods could be actually given to employees now, as a one time or something like that. Just wanted to get a sense on the employee cost and how should we model that going into the next 12-18 months.
Let me see if I can help you. If you look at our employee cost for ASK, you will see a rising trend from 2019, 2020, 2021. That rising trend, as I think we've talked in earlier calls, was a large part driven by pilot training. In that period, we had to induct a lot of pilots. We went out and got, I think, 270 expat pilots. We got a lot of jet pilots who were 737 qualified. We had to convert them into A320 pilots. All of the training bubble really pushed up our employee cost. The way we look at it internally is that 2019 is probably a good year, and 2020 and 2021 were more anomalies because of this training bubble that we faced.
Our goal is to try and get back to 2019 levels with all the restoration of pay and so forth. That's the number we're targeting, that we'd like to be roughly there. In terms of restoring pay, actually, we've already started doing quite a few in quite a few areas. Not universally and not everywhere, but we started gradually roll back, and we fully expect that we'll be rolling back gradually. We won't do anything in a rush, but we will be as our profitability improves, we will be rolling back. When we stabilize, I do believe we'll stabilize at 2019 level. Right now we are way below that, of course.
Great. That's helpful. Thank you so much.
Thank you. Our next question is from the line of Arvind Sharma from Citi. Please go ahead.
Yeah. Hi. Good evening, sir, and thanks for taking my question. Sir, just your views on the competitive landscape and its impact on pricing. If you see right now, 15-day window prices are very high, but immediately on the 16th day they fall sharply. What do you expect? Do you expect this trend to continue, or do you see a change here from the perspective of the competitive landscape? That would be it.
The competitive landscape. Clearly there's a lot of change happening. Akasa is supposed to be flying from May, I believe, is what they've announced. Vistara, AirAsia, Air India, they're going through some sort of consolidation. We do see a lot of change. I have to say to a large part, we focus on ourselves and not so much on the competition. I mean, when we look at what we are doing and what is our strategy, our strategy is to run a world-class airline. As we demonstrated over and over again, in 2021 calendar year, 10 out of 12 months we were number one, and when we were not number one, we were probably number two. Worldwide, we are one of the top five most punctual airlines in the world.
Our customer service, I have to tell you know, we go carefully through our customer complaints. I find that a great source of information in terms of how actually are we doing. A large majority of the emails, at least I get, are all about complimenting our service. The negatives are declining fast. In all of that, if you run a great quality airline, our brand name is getting stronger. If you keep your costs under control, yeah, I mean, I will see all the rest of it as noise in the system. Someone comes in, someone goes out, someone adds capacity. The key focus is what are we doing. We control our costs. We make sure we're doing great customer service. I have to say, employees are a very big part of our strength.
It'd be impossible to deliver good customer service. It'd be impossible to go through the COVID period with everything that we've thrown at the employees. We have been changing schedules almost on a weekly basis. Where before our schedule used to go out for eight weeks and be stable. We are rostering and rostering again, and then we're telling people to stay back late and allocate capacity in different ways. Through all of that, our employees have held fast and have done a really superior job. You know, you have good employee culture, you do good customer service. Yeah, I think you can weather any storm. Specific to your yield, what's going to happen? I think, you know, the yield environment is generally fairly good, I would say, given everything that's happened.
I think it's because people have a lot of pent-up demand to travel. You know, I mean, I'll take Malé as an example. Pre-COVID, we'd do a Bombay-Malé and a Bangalore-Malé, and we'd struggle to fill those planes. Then, as soon as Malé opened up, it's like, my God, you can do Chennai, Bangalore, Hyderabad, Delhi nonstop and do well to Malé. There's all of this pent-up demand. I say the same thing for the hill stations around India, whether it's Dehradun or Bagdogra, people want to travel. So, I think the yield is. I don't see it declining from here. I think it'll hold up pretty well, is my best guess.
Sir, just a follow-up, and thanks so much for the details on the yield. Beyond, I was just referring to the 15-day window because we see a very sharp fall immediately after that 15-day support. I think it's a regulatory support. Do you think that could stay, or do you believe there could be a change there wherein you could, you know, be more nimble in pricing even in the 15-day window?
Yes, I'll ask Sanjay to elaborate on this.
Good afternoon. We've seen a decline of the fare outside 15 days window, primarily due to the reduced demand, which kind of started coming in the last week of December and then has continued till about third week of January. As the demand is now reversing back, you know, to a better number, better booking trend, I think this pricing 15 days out will also get automatically corrected. It's just a question of demand and supply, I guess.
Just to pick up on his January versus February. You know, I think we can describe the revenue in two waves. One is a big wave down. Up till December fifteenth we were holding strong. Then December to December 15 —and again, that's captured in this quarter—the last 15 days. To January 15 we saw a big wave drop. However, as Sanjay was alluding, from January fifteenth to February fifth to sixth, we are seeing a small wave up. Not a big wave up, but a small wave up. In a way we feel like, okay, the worst has come and gone. Maybe things are slowly getting better. It's not rebounding, but slowly getting better. At least we can say for sure it's not getting worse.
Thank you so much, sir.
Thank you. Our next question is from the line of Chintan Sheth from Sameeksha Capital. Please go ahead.
Thank you for the opportunity. Am I audible?
Yes, you are.
Congrats for turning profitable for the quarter. On the, you did mention that next quarters we are looking at a slightly lower capacity. But broadly, if you can guide us where we can be, you know, post this replacement of old ceos to neos, what can be the capacity, say, end of 2023? Obviously, assuming that no COVID will come back to hit us again. Broadly, we can guide directionally. Not fiscal year 2023 or 2024, maybe if you will. Whatever works for you. Directionally.
Capacity-wise, again, we've said that for the next year our growth will be muted. Year- over- year we'll see some change, of course. First of all, we'll bring the utilization up. You know, if you go from 10.7 to 13 hours, that's a big amount of growth. In terms of fleet count, we're not growing much. It's in the year 2024, fiscal year 2024, we'll start seeing rapid growth. I think we've given aircraft deliveries in our earnings release, right? Those deliveries should tell you what's happening. Behind all that is the increase in utilization that will increase. Also, Sanjay reminds me that the A321 capacity also helps because that's the growing part of the fleet.
Correct. You don't want to put any number to it.
Not yet. I think by next quarter we will start giving those numbers.
Sure. Okay. All right. Thank you.
Thank you. Our next question is from the line of Achal Kumar from HSBC. Please go ahead.
Hi, good evening, gentlemen. I had a couple of questions. First of all, on the yield. You have reported a very, very strong yield, and that's highest ever in the last seven to eight years. Is it because of your networking? Is it because of the government fare capping? Is it because of international? What exactly is going on, and how do you see once the things normalize? Also, of course, you know, all the airlines have been complaining about the fare capping which has been hurting. Now, of course, with the higher fuel price, that might have been reversed. Now probably that is helping. How do you see once the government removes the capping? Do you think the fares will start coming back?
If you could please help me understand the yield and the background.
Look, I'm quite optimistic about the yield environment. As I said, there are pockets of strength which are not going to go away. I talk about this pent-up demand. This pent-up demand, people want to travel. As soon as you add capacity anyway, and if there are no restrictions of the state government and there's no big Omicron or Delta wave hitting the news media, our numbers just bounce up hard and they bounce up very fast, and they bounce up at a good yield. I think people have slowly fallen in love with travel, if you will. They're used to the slightly higher prices. As I've said tirelessly many times, India has some of the lowest fares in the world. They can...
Only thing they can do is go up. I'm quite optimistic about the yield situation. You know, the government has been helpful on this 15-day thing. Again, every time the fuel goes up, we do talk to the government about, hey, what can we do? Because really our problem is that we are in a high fuel environment and a high tax environment. The only way we think we can do to manage that is through higher yield. I also have to say that, look, it helps a lot to be the airline of choice. You know, frankly, it's like, you know, I'll take charters as an example. What tends to happen is, a group will say, "I want to do this charter.
Can you beat this price, or can you at least match this price?" We are the last resort, if you will. They'll shop around, they'll go to three different airlines, and finally they'll come to us and they'll say, "Hey, how about this price?" It's a good position to be in. I think we see that in group fares also. Individuals also write to us saying, "Hey, you are my airline. I mean, I'd like to prefer to fly you." We can't charge a higher price, of course, but we can at least, you know, in terms of the mix. People will always tend to gravitate towards IndiGo, and that helps us a lot. I go back to this connection between employee culture, customer service and yield. They are all three very closely interrelated.
Because we've got ourselves in a good position with the employees and they're providing good customer service, that's why I'm sort of optimistic about a competitive yield picture. Broadly speaking, I'm optimistic about the yield picture in the country in general because of this desire to travel that is there.
Right. Fair enough. Taking the last question forward on the competitive landscape, of course, you have your own strategy and you care about yourself. But then, you know, recently, I think Akasa clearly said that they are going to sort of focus on the smaller cities where you are sort of increasing your presence, as you said, that and those are so quite profitable for you. And now Akasa is sort of trying to engage in your areas. Of course, they have said that they will focus on tier two, tier three cities. And of course, competition does impact the yield and then additional capacity coming. So how do you see the
I mean, of course you said your strategy, but how do you see the strategy changing in case of course a new airline starts invading and they start focusing on tier three cities. We all know that India is still underdeveloped market when it comes to the air traffic and because the focus is still on the metro to metro and you know that non-metro probably they don't have so much of demand to manage such a big capacity. How do you see the overall situation?
Look, there'll always be competition, right? In every industry, there's competition. You can't say, "Oh my God, there's going to be competition." Yeah, okay, there's competition. It's something you live with, and it's probably good for the industry. Question is, how good is their implementation? I think IndiGo has proved over and over again that it's great at implementing. Airline A might say, "Oh, I'll do ultra low cost." Airline B will say, "Oh, I'll go full service." Airline C will say, "I will match IndiGo on everything." Yes, yes, yes. The proof of the pudding is in the implementation. I mean, who has implemented well and execution and employees and employee culture? I mean, those things don't just happen by accident. Wolfgang, go ahead.
Yeah. Wolfgang here. Hello. What I want to mention is we have also the right fleet to implement our strategy. You know, we have the ATR and we have the A320 and we have the A321. We are very flexible in serving all the markets from tier two, tier three, up to the metro-to-metro and also international. This is a huge advantage we are seeing compared to some other competitors who have limited, surely, only because of the fleet also naturally. Because we have the size and scale, we can play around with the different fleet sizes also. It's a very important aspect.
Yeah.
In implementing, because you have to see this as one in total, which network you design.
Achal, if you said, let's look at the quarter that we just reported, October, November, December. We know October was a weak month. We know after December 15 we had Omicron, and yet IndiGo produced a profit. Why? I mean, what is the one single reason why we produced a good profit? I would say execution. It was execution by the employees. We just kept changing our schedule almost on a weekly basis. We just made sure that we were on time, made sure we had good service. Based on good execution, we made money. That's all we're going to focus on. If others can execute well, they'll make money too.
Thank you. Mr. Kumar, I request you to join the queue for any follow-up as there are several participants waiting for their turn. Thank you. The next question is from the line of Ansuman Deb from ICICI Securities. Please go ahead.
Yeah. Thanks for the opportunity. My question is regarding on, again on the yields part. We having crossed the INR 4 per ASK kind of is a benchmark kind of a thing because even when Jet Airways went out, I think, you know, that was not this high. I just wanted to understand one thing in the sense that there is a pent-up demand, but if in case international would have been flying in Q3, what could have been the yield, if you could just give some kind of color on that.
Sustainability of beyond four yield, in the sense like, you know, if you think from the pent-up demand, one quarter, two quarter, three quarter phenomena, after that, if your views on the sustainable yields above 4.2 or something like that, if you could give any color on.
Yes. Let's take international. Well, let's do a little bit of domestic first also. See, I mean, you have a virtuous cycle. When we're going into small cities, we're not just that point-to-point traffic. We're getting a lot of connecting traffic. That's not going to go away. It's a connecting traffic that is almost unique, let's say. I'll just use an example of, I'm making this up, from Imphal to Coimbatore. You know? I mean, how many airlines can you take, and how many airlines will give you the choice on a morning flight, afternoon flight, evening flight, et cetera? That creates unique opportunities for us to capture good yield. Now, that's domestic, and I'm just saying that's not going away. Hyderabad is a wonderful example of that, frankly. I mean, they're, you know.
Airlines look for the sweet spot when you say, "Oh, I'll fly to city A, my hub, and it doesn't matter what time of day I come in, it doesn't matter where I come from, I'll get connecting traffic." You know, Chicago luckily, not luckily, happens to be one of those which you call an omni-hub. You just bring it in anytime, it's connecting to somewhere. Hyderabad is like that for us now. It doesn't matter where you come from. I mean, before we used to sort of agonize over should we do Surat to Bangalore? Oh my God, will it make money? Now, Surat to Hyderabad, just put it in, man, and make money. We have this sort of unique structure that we've now built, which allows us to grow and domestically capture need that no one else can.
Okay, now let's move to your international question. Clearly, when we opened Kuwait, when we opened Saudi Arabia, we got more than normal yield because there's a lot of pent-up demand. Those markets have been flying now for a couple of months. Kuwait has been up for almost three months. Yes, the yield has come down a little, but not a lot. We are beginning to see two-way traffic. As we add more capacity, we do expect the yields will come down, but at the same time, the unit cost will come down, too, because of bringing the aircraft utilization up from seven to 10.7 to 13 and so forth. There will be a trade-off between yields and costs, unit costs as we add capacity, but I think it will work in our favor.
You know, you said 4.07 is a sort of a high-water mark. I believe we'll be seeing those numbers again and again, not every quarter. Clearly now, this is a weak month for us because of Omicron, but I believe we'll keep hitting those numbers pretty regularly from now on.
Great. That's really wonderful. Thank you.
Yeah.
Thank you. Our next question is from the line of Rajesh Rawat from HDFC Bank. Please go ahead.
Thank you for taking my question. In the last quarter, we have done deliberation for improvement in the cargo business also. Some of the planes were converted to cargo, and then some of the belly space was allocated to cargo also. How or where are we on that strategy, and how is it yielding benefits to us? Just a sense on that. Secondly, what is the plan for QIP, which we have initially planned? Any other measures to improve liquidity? That's it from my side.
Cargo, and I'll ask Jiten to talk about liquidity. Cargo, look, there has been a transformation in the business conditions, and it's driven by two different factors. One is regulation. The government doesn't allow airlines like, I think Cathay, Korean, they used to do into Chennai to Bombay to Dubai, and the government said, "No, no, you can't do all that in shipment within India," and so forth. Cathay, as you know, has reduced its capacity many times. At the same time, the export-import business, as you know, is booming, right? India's exports are booming, India's imports are booming, so a lot more trade happening. Then there's supply disruption. Container ships are not available. Oh my God, ports are congested. Airplanes are flying above all that. Cargo business in general has seen a transformation.
On top of that, we have high export countries right next to us, Bangladesh, Vietnam, and they're looking for capacity to ship out to Europe or whatever, and India is a great transshipment point. This is a sort of macro long-term picture. Cargo has become more, sort of fertile ground for us. Near term, in the worst of the passenger crisis, we gave Cargo 11 planes and said, "See what you can do with it." As passenger demand has grown, we've pulled those airplanes back. Right now, Cargo only has three airplanes for freighters and two more planes, which we call cabin cargo. We've taken out seats and putting nets, and they carry cargo in cabin. However, they're still limited, and the biggest limitation is the size of the door.
It takes a long time to load. Load takes a long time to unload. You can only put in certain size packages, whatever. As the freighters come in, we can catch some of that. Yes, we are very bullish on the cargo strategy. We are going to go with the four freighters, and we are optimistic it will become a good business for us.
Yeah. I'll take the liquidity part question. If you see our year quarter end number, we are reporting a free cash of INR 78.1 billion, which is about INR 15 billion more than what we reported in September. In terms of our overall cash, we are pretty much comfortable. As we always do, we keep watching the space for any changes which are happening. At this stage, we feel we don't need further liquidity because we have sufficient in the bank in terms of our financing ability also. That's where we are and we'll keep monitoring the space as things pan out.
Generally, I mean, just to put a top-line phrase to it, cash flow is improving and our liquidity position is improving.
Thank you very much for taking my question.
Thank you. Our next question is from the line of Mitul Shah from Reliance Securities. Please go ahead.
Thank you for giving me this opportunity, and congratulations for a very strong performance in this challenging environment, sir. I have question on consumer sentiment in terms of, the first and second wave, there was a severe negativity. This time, despite number of cases being high, even railway travel, we are seeing waiting periods. Barring apart this government restriction, what you people are experiencing in terms of passengers who wants to travel or if sudden this, restrictions goes away, what would be the likely situation?
As I said, through December fifteenth, our domestic traffic numbers were higher than pre-COVID. International was lower because of capacity restrictions, nothing else. From up to December fifteenth, we were very strong. From December 15th, we kept going down all the way every day until January fifteenth. Every day the trend is lower, and it's like, "Oh, my God." Okay, January 15th we sort of bottomed. From January 15 to February fifth or so, we're seeing a slow build up again. We haven't gone back to any of those higher levels, but we stopped dropping for sure and we are seeing a slow build up again. This all says that, look, people just watch the COVID numbers, they experience whatever they do with their families, their friends, et cetera, and as soon as the numbers come down, they're eager to travel.
What do I expect? As soon as Omicron numbers subside, I think, you know, December was a great month. I think March, April will again, we will be back up. And this is all assuming Omicron does fade away.
Thank you, sir. Second question again, I already replied on competitive landscape, but just want to check. In terms of pricing discipline, what we are finding despite this slowdown situation, lower utilization, yields are much stronger. Do you see this to sustain or how the competitive scenario different compared to the historical situation?
Look, everyone wants to manage the cash and build up the cash balance, right? I mean, you know, as they say, nothing focuses your mind so much as the cash situation. I think every airline's mind is very focused on the cash situation right now. That being the case, people are not gonna be foolish in terms of yields. Fuel prices are up. Our capacity is not being fully utilized. We have to manage our yields. You know, we do our stuff, people do their stuff. No, everyone is sensible. Everyone is in a way self-serving, anyway everyone is professional. That is the competitive side. As I said, there's the underlying fundamentals of the industry, where people are willing to travel at a higher price. People need to travel more.
You know, there's more migration happening, more factories are opening up in places, labor is in the northeast, the actual demand is in the southwest. Yeah, there is a certain buoyancy to the traffic. Along with that, as we've seen, people want to travel for tourism purposes as well. There are a lot of good fundamentals here of, you know, industrial growth, migrant labor, families. Before it was like, "Oh, we live in one state," and all families here. No, now families are spread up all across India, so people need to travel. Those fundamentals will work in our favor. As we know, India has one of the lowest propensity to travel in the world. India has some of the lowest fares in the world, and there's only one way to go, and that is up.
Thank you, Mr. Shah. Shah requested to join the queue for any follow-up. Our next question is from the line of Iqbal Khan from Edelweiss. Please go ahead.
Hi, sir. First wish and congratulations for the good result. Just one question. I mean, I have two couple of questions. You spoke about the cargo part. During the quarter, could you please quantify that how much is the cargo revenue for this quarter versus Q1 this year? Secondly, if you can throw a light on the corporate travel, how they have been doing in this quarter, and what is the current perspective about it?
Cargo, in the quarter itself, as I said, the cargo revenue could not grow because we pulled airplanes out from cargo. We had 11 planes. We said, "Sorry, sorry, cargo, we need it for passengers." We went down to three. Cargo still grew by the way. It didn't shrink, but we pulled a lot of capacity out. On the business, I'll give it to Sanjay.
On the corporate travel, we saw the recovery of almost 70% of the pre-COVID level of the corporate travel in the month of December. With the Omicron third wave, we started seeing the drop in the business and it came down to about 25% of the pre-COVID level in the first half of the January month. Again, as Rono mentioned, that we are seeing a somewhat recovery after middle of January, and we are seeing some better numbers coming in. We hope that we'll get to the similar kind of growth very soon, next few weeks time, going forward.
All right. Sir, just one bookkeeping question. If you can just give us the number of passengers for this quarter and the capacity utilization of the international fleet?
For these details, you can connect with our IR team, they'll provide you separately.
Thank you. Our next question is from the line of Mohit Adnani from CRISIL. Please go ahead.
Yes. Thank you for allowing me the chance of asking a question. I want to understand that now with the global situation with airlines improving, are you seeing a hardening? We have signed leases for the long term. The new models that are being inducted, are you seeing an increase in the lease costs? Secondly, if the leases are going up, I mean, is the SLB income also going to go up? Because since the demand has been increasing on A320 and A321 family is the one which has always seen a lot of demand. Are you expecting higher SLB income from them?
You know, we keep watching all our lease rates and our SLB income and so forth, and we are not really seeing any change. I mean, we keep asking that question every week and like, "Okay, what's happened to the latest one?" They seem pretty much in line. There could be some turbulence later, but right now it's pretty stable.
Okay. Thank you. Just a follow-up. Now that you're taking four passenger to freighter conversions, are you lining up any more, you know, cargo-only planes or freighters? Is IndiGo looking at that currently?
We constantly keep looking at it. Our cargo plans are evolving, if you will. Right now we made a commitment to four . We keep studying the market to see what the right number is.
Okay. Thank you very much.
Thank you. Next question is from Nikunj Mandowara from UBS Securities. Please go ahead.
Yeah, hi. Thank you for the opportunity. I just wanted to understand our delivery schedule for the remaining ATRs, which I believe are 15 or less, and about the possibility of inducting new ATRs or other smaller aircraft and what can be the potential timelines. Considering that we are eyeing growth in tier two and three cities, won't we need many more of these aircraft for the medium term?
I'll let Wolfgang take that question.
Yeah, hello. We are not commenting in detail on the deliveries of the ATR, but we get something like a number of more ATR in the next year. We also have lease expiries, and we're just starting our discussion evaluating if we should extend some leased ATRs, which would increase our fleet, or we should allow the fleet to stay stable. The market right now we are assessing it, so we have more flexibilities. Growing or staying stable, that is just a work in progress right now.
Okay, thank you.
I would just say that if you know, I'll speak for myself personally here. If there's one thing that has surprised me in the current environment, is the strength in the small fleet. I've been like, "Whoa, this is good.
Thank you. Next question is from Ashish Shah from Centrum Broking. Please go ahead.
Yeah, thank you for the opportunity and good evening, everyone. Just one question. Like we talked about the cost structure on the employee side, ideally where we would want to be at the 2019 level. Can we give an indication on the maintenance cost aspect as well? Obviously, today the number is inflated because of the lower denominator. Would we want to be at like INR 0.50 or thereabouts? Or you think that it would be higher?
In terms of, you know, the outlook, you know, first of all, foremost, we should keep in mind that we cannot give a number like that because it's still, we are still returning the ceo, so we still have some time before we can actually stabilize. That's point one. Having said that, we also need to keep in mind the fact that overall, there is an escalation which is included in our contract. There is a currency fluctuation. All put together, I would say they would be. It would not be the numbers which you are looking at. That is not going to be the number.
Our focus is that we remain within the range where we are comfortable, and that's what we will look at. Again, as I said, till the redeliveries are happening, we are watching this space very closely. Once we get settled and then we'll be able to give a better guide.
I just do want to temper the discussion a little bit, though, with what's happening with oil prices. I mean, I, as I recall, a year ago, we were looking at $45 a barrel. Now we're looking at $89. Some people are talking of $125. Oil really is a bit of a perplexing problem for us.
Right. Thank you. That's it from my side.
Thank you. Next question is from Vipul Garg from Kotak Mahindra. Please go ahead.
Hello?
Yes.
Sir, thanks for taking the question. First of all, congratulations for breaking even and reporting a profit. Secondly, observation is that there is a sharp dip in the CASK ex- fuel. What is the reason for that?
CASK ex-fuel. 1, the biggest one is the capacity. You know, we went from 7.7 hours to 10.7 hours, so that clearly helps CASK a lot. After that, it's just every area with better cost management. As I said, execution. I mean, the biggest driver was the capacity, and that's why, you know, we've only gone from 7.7 to 10.7. We can go to 13.5 very easily. That's our plan. We need the international market to open, and when it does, people were talking about, "Oh, but won't the yields go down?" Yes, it will. We think the CASK will also go down.
sir, in the past also, when the capacity was being fully utilized, at that time also the number was something about 2.97. Are there some cuts in the, say, expenses like employee expense, et cetera?
Look, we had a cost bubble build up in the year 2020 and 2021. I mean, and we talked about it at the earnings call. What was there? There were all the ceos. The ceos were driving us nuts. I mean, those engines were expensive. There were maintenance problems. That maintenance cost in 2019, 2020 was a bubble related to the ceos, which are now going away. Equally, as I said, there were a lot of, we were running short of pilots. We were growing fast, we were getting expat pilots, we were getting Jet Airways pilots, and the training bubble hurt us a lot. What we're seeing is, sort of normal return to normalcy, if you will, on both pilot costs and, maintenance costs, and that is helping us as well.
Okay. Same would be continuing future also?
Yes.
Sir, secondly, how much of the free cash is being contributed by the advance booking which company has received?
See, advance booking is part of our free cash generally, and we don't normally call out a separate number for it. It does contribute a portion of it, I would say, and not as a percentage. I'd not like to call that out. Yeah, this is an important financing which we get always. As the bookings keep building up, our free cash also goes up vis-à-vis that.
Thank you. Our next question is from the line of Krupashankar from Spark Capital. Please go ahead.
Yeah, thank you for the opportunity. Just one question from my side. If I look at absolute number basis, the supplementary rentals have gone up quite substantially. In fact, substantially higher than the historical levels in FY 2020 itself. So any guidance on how perhaps it will shape up on absolute? Would it be over around INR 18 billion or so if we maintain our capacities at current levels and perhaps you know increase from 10 or 10.7 to 13.5 will go up further? Any color on that, please?
Supplementary rental has an element of variable. This period obviously has seen significant departures and therefore our supplementary rentals have gone up from that perspective. The fixed cost, again, as I said earlier, is dependent on some of it is fixed, which will remain. Then there is this costs which are when we are redelivering, we are incurring some costs. To give a particular number is difficult, but as I said, we would like to maintain this current number or maybe a few basis points plus and minus from here. That is the objective, and that's where we want to stick to.
Yes, this will all depend on how, when we are able to fully deliver our ceos by end of this calendar, then we will have a better handle on this number at least.
Thank you. That's very helpful. That's it from my side.
Thank you. Our next question is from Aditya Mongia from Kotak Securities. Please go ahead.
Yeah, thanks for the opportunity. I had a couple of questions. The first one that I had was, in context of your RASK minus CASK, that's the spread that you make. As you move forward, do you see versus, let's say, competition it benefiting more from better yields that you can get or further reduction in cost? By yields I mean you said that you had three kinds of aircraft. You can do metro to metro, you can do small cities, you can do international. I'm just trying to get a sense, can you leverage that a lot more, or are there cost benefits incrementally that will help you more than the yield improvements that you would see?
IndiGo has always been laser-focused on cost control. I think on a global basis, we are one of the lowest cost airlines in the world. We want to stay there. Costs are down, and they'll stay down, and we'll manage our costs to be among the lowest. The opportunity for further cost reduction, after you're always already among the lowest in the world, it's hard to become even better on cost. You just have to maintain your position, if you will. We see lots of availability for improving our PBT margins. That's what we should be focused on on the revenue side. Where's our focus? Our focus is on maintaining our cost leadership and then improving on our revenue performance.
Got that. The second thing I wanted to ask you was that you talked about the utilization levels being improving from 7.7 to 10.7, and they can improve further. Assuming that international goes nowhere and you kind of come back to 100% domestic capacity levels or slightly higher, how much more improvement can happen from the perspective of this 10.7 RASK also?
Well, I think the sort of premise of if international goes nowhere, why should international go nowhere? I mean, you know, international is gradually opening up. All the countries are saying, "Hey, if you're vaccinated, why do you have all these restrictions?" international is opening up and will continue to opening up. I mean, I don't want to create a false premise of what if it doesn't happen. No, it is happening and it will happen. That's where the biggest opportunity is. Domestic, you know, you're sort of limited by the hours in a day. You don't want to be flying. You can do a few flights at midnight, but everyone wants to travel at 6 A.M. and come home by 10 P.M. at the latest, et cetera.
Trying to improve domestic capacity utilization is going to be tougher. International is easy of course, because it's all night flying. You just take the plane and keep going. International, I think we have to assume that things are going to improve because they already are.
Got that. Thanks, Rono. Those were my questions. Thank you.
Thank you.
Thank you. Ladies and gentlemen, due to paucity of time, that would be our last question for today. On behalf of IndiGo, that concludes this conference. Thank you all for joining us, and you may now disconnect.