Q4 20/21

Jun 5, 2021

Evening, ladies and gentlemen, and welcome to Indigo's conference call to discuss the 4th quarter fiscal year 2021 financial results. My name is Aman and I will 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 hand the conference over to your moderator, Mr. Ankur Goyal, Head of Investor Relations for Indigo. Thank you and over to you, sir. Good evening, everyone, and thank you for joining us for the Q4 fiscal year 2021 earnings call. We hope that you and your families are safe and in good faith. We have with us our Chief Executive Officer, Bruno Dutta and our Chief Financial Officer, Jitin Chopra, to take you through our performance for the quarter Wolfgang Prakshawa, our Chief Operating Officer and Sanjay Kumar, our Chief Strategy and Revenue Officer are also with us and are available for the Q and A session. Before we begin, please note that today's discussion may contain certain statements on our business of financials, which may be considered 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 today. The transcript of the Q and A session will be uploaded subsequently. With this, let me hand over the call to Ronu Jattva. Thanks, Ankur. Good evening, everyone, and thank you for joining the call. Hope all of you are safe and doing well. We have ended a very difficult year for the aviation industry. In the last quarter, we were seeing a lot of positive signs. The number of COVID cases was steadily going down. The capacity allowed by the central and the state government was going up. Consumers were showing their willingness to travel. As a result, we were showing an improving performance every quarter over quarter. However, with the second wave of the COVID-nineteen sickness, we have seen a significant drop in travel demand. This coupled with the fact that average fuel prices went up by roughly 26% quarter over quarter impacted our results severely. As a result, for the quarter ended March 21, we reported a net loss of INR 11,500,000,000 Compared to a loss of INR 6,200,000,000 for the December quarter and a loss of INR 8,700,000,000 for the same quarter last year. For the full fiscal year 2021, we reported a net loss of INR58.1 billion. Since the end of February, we saw a steady recovery in traffic with over 180,000 passengers traveling with us daily, I think peak load factors of 85% on certain days. Our daily bookings were also strong, Reaching a peak of 231,000 bookings per day. Unfortunately, in March, we saw a in the number of COVID cases across the country and we saw a 10% reduction in passenger. Our RASK for the quarter was INR3.26, which was roughly similar to the RASK that we had in the December quarter. But the sharp increase in fuel costs coupled with adverse foreign exchange impact increases our losses during the quarter. During the quarter, we continued to increase capacity deployment in Tier 2 and Tier 3 markets to further strengthen our regional presence. We announced operations to 7 new airports during the quarter. Of this, we have already started operations to Leh, Pranun, Rajgoth and Agra. On the international front, during the quarter, we were operating air bubble flights to 10 cities, mostly in the Middle East, as well as charter operations to various destinations. Our international capacity deployment increased by 36% compared to the December quarter. Overall, our international capacity in the Q4 was at around 50% of our pre COVID international's capacity. For the fiscal year 2021, our cargo revenues increased by 9.6% compared to the previous year. This has really supported us during these difficult times when the passenger services have been severely impacted. Building on the success of the cargo business, we have initiated our freighter program and are in the process of sourcing for A321ceo aircraft. The A321C2F passenger to freighter conversion It's the most efficient narrow body freighter available, offering 24 container positions and supporting a payload of up to 27 tonnes. The delivery of our first Peter is expected in the first half of twenty twenty two. Our investments in the Peter program We'll help strengthen our product and services in this segment and not only accelerate our own business recovery, but will also be a strong engine of economic growth of the country. During the quarter, we also continued to have the best on time performance in the industry With an OTP of 95.17 percent. With the rise in the COVID cases, there are several additional restrictions imposed by various state governments And our customer relations team did a tremendous job in addressing them. Our customer complaints have been the lowest among all domestic carriers At 0.1 complaint for 10,000 passengers. For this, I would like to thank all our employees, especially the operations staff for the tremendous performance over the year. It's also been an immense pleasure to share that Indigo is now certified as a great place to work. Let me summarize the key highlights for the year. We are focused on strengthening relationships with the key constituents, Including our customers, vendors, customers and employees. We are replacing our older CEO aircraft with more efficient new aircraft. Our cash position is, of course, the most critical parameter in this crisis, and we have managed our cash position immediately. The COVID crisis also gave us the opportunity to look at new ways of doing business. We have done charters for both passengers and cargo Great success. We were able to support the government with the initiatives of repatriation flights. We were number 1 on average OTP for the year and our net promoter score continues to be high, higher than what it was pre COVID. We are strengthening our domestic network. We have opened new stations and we are increasing our penetration of smaller schemes. We are remaining true to our mission of being a catalyst in the economic growth of the country and therefore deliberately And actively engaging and actively engaging the students. Sorry about that. The most important thing I think to Indigo is its employee culture. Okay. The most important thing I'll say, Pankaj, Pankaj, It is employee culture, and we are very focused on the high performance and high employee engagement. In conclusion, We have our vision firmly rooted on the long term and we are not willing to be distracted by the cause of the pandemic. This means that we are constantly questioning ourselves on what actions we need to take to keep the foundations and the pillars of IndiGo strong. So that when we do emerge from the crisis, we are well positioned for the good times that will inevitably arise. Given this environment In light of profitability for the year, our Board of Directors has not recommended dividend for the current year. While our cash position remains strong with free cash of INR 71,000,000 as on 31st March, We remain committed to safeguard ourselves against the ongoing disruption by exploring various options of raising funds. In line with this, our Board has approved raising of funds by way of qualified institutional placements of up to 30,000,000,000, And we have already initiated the shareholder approval process. In terms of our short term outlook, we started seeing the decline in airline trials in March, But this decline accelerated the new fuel in May. While most started off with very weak traffic, We did see a modest turnaround beginning from last week of May and this has continued into early June. This shows that passenger confidence returns swiftly to the decline in COVID. We are hopeful that with the reducing trend in COVID cases And the increased pace of vaccination, passenger confidence and airline traffic will gain further momentum by early July. So let me try and give you a broad brush picture on a best guess for the domestic revenue outlook. February 2021 was the best month near post COVID and booking on certain days in February peaked at approximately 80% of pre COVID levels. Our best guess scenario is that we will hit February 2021 domestic travel levels again by Q3 of FY 2022. The near term outlook for international companies will be weak And the meaningful recovery of international traffic will probably be pushed to the Q4 of 2022. Given the weakness in revenues in April May, We will of course report deterioration in revenue performance for the quarter ending June 2021 as compared to March 2021. But after that, we expect to see a steady improving revenue trend for the rest of the year, provided, of course, the anticipated third COVID wave relatively flat. However, despite all the near term challenges, I believe in the long term IndiGo story that explosive growth innovation remains intact. It is important to note that IndiGo has dedicated the past 12 months to strengthen its competitive position in the industry in terms of fuel costs, Liquidity, customer service levels, network and employee training and culture. We are therefore poised to expand aggressively both domestically and internationally, France has been negative over. With this, let me hand over the call to our CEO to Zitin Chopra. Thank you, Rona, and good evening, everyone. Hope all of you are safe and doing well. For the full year fiscal 2021, We reported a net loss of INR58.1 billion, an EBITDAR of INR6.2 billion and an EBITDAR margin of 4,300,000,000 or 3 percent. For the quarter ended March 2021, we reported a net loss of INR 11,500,000,000 And EBITDA of INR 6,500,000,000 and an EBITDA margin of 10.4%. On the revenue side, the second wave of COVID-nineteen starting March 21 resulted in demand erosion, thereby impacting RASK, which decreased marginally from INR 3.27 in December quarter to INR3.26 in March quarter. While our yields remained flat at INR3.7, our load factors reduced from 72% in the December quarter to 70.2% in March quarter. On the cost side, we were adversely impacted by fuel and products, which was partially offset by additional capacity deployment. The fuel price went up significantly during the quarter by 26.1 percent, Therefore, increasing our fuel CASK from INR0.75 in the December quarter to INR1 in the March quarter. The foreign exchange went up went against us during the quarter, resulting in foreign exchange loss. While we had a gain of around INR2 1,000,000,000 in the December quarter, We had a loss of around INR1.2 billion in March quarter, impacting our costs and profitability adversely by INR3.2 billion. As a result, our loss during the quarter widened, breaking the improving trend that we have been seeing in the past few quarters. Despite the significant jump in fuel prices during the quarter, our cash excluding foreign exchange compared to December quarter remained flattish at Around INR 3.8. Given the adverse profitability, our average net cash burn increased from INR150 1,000,000 per day in the December quarter INR290 1,000,000 per day in the March quarter. Given the current performance erosion with 2nd wave of We anticipate the cash flow to further increase in the June quarter. Managing our cash position continues to remain our primary focus and we continue to work For this purpose, we are working on securing credit lines from vendors and entering into sale and leaseback arrangements for new aircrafts. These two actions will result will likely result in additional liquidity of INR45 1,000,000,000 for the coming year. Apart from this, We have also secured a Board approval for raising funds by way of qualified institution placement up to INR30 1,000,000,000 And this proposal is under consideration by the shareholders. We ended the quarter with a free cash of INR 71,000,000,000 A total cash of INR185.7 billion, a net reduction of INR3.4 billion in free cash as compared to December 4th. The capitalized operating lease liability was INR257.4 billion and our total debt including the capitalized operating lease liability was INR298.6 million at margin. With this, let me hand it back to Ankur. Thank you, Ronu and Jason. Thank you very much. Ladies and gentlemen, we will now begin the question and answer Participants are requested to use answers for asking a question. Ladies and gentlemen, we will wait for a moment while the question queue First question is from the line of Lokesh Dell from Credit Suisse. Please go Yes. Hi, sir. Good evening. Basically, I wanted to ask you, in this quarter, we have observed increase in combined rental and maintenance costs. Is that natural? Is there something else that we need to watch out for? Plus, particularly given that somewhere in FY 2020, we started with Quarterly provision of GBP2.6 billion, which was supposed to run out sometime in FY 2022. So can you just give us a perspective around that, please? So basically our rentals are largely variable and going up because of the capacity gone up. This year, this quarter, if you see our capacity compared to last quarter has significantly gone up and that has added to our rental, which is primarily the supplementary result we have talked about, which is a very preliminary nature. Other than that, there has not been a significant change. And if you try and match that with our capacity movement, you will be able to get to the answer. And also I would say that we are returning a lot of things, but right now many of them are sitting around in MROs during the return process. So they're not going up as fast as we would like, but that's I think some cost to guarantee costs. Yes. I have very short follow ups. One thing is, how do you put in perspective the government tinkering of capacity down to 50% and increasing the fares? What objective does that serve in the current industry context because industry could have chosen that itself? 2nd question, which is more numbers is What is per unit efficiency that you are achieving on A321neo versus CEO aircraft that you used to have? Thanks. Okay. So on the government capacity and fare bans, Indigo has consistently been against any kind of government regulation. And we have, of course, objected to these brands and the capacity restrictions. Looking ahead in July, We are scheduling exactly at 50% of capacity. So we are going up to the limit. And again, we've written to the ministry that, hey, we'd like to go higher. So we are just hoping that the government will stay true to its thought in July 31, they will remove the capacity Restriction. The second question was regarding CEO's business. So So let me tell you, we are very happy with the A321 aircraft. It has a unit cost that is 10% lower than the A320. So that's a very good thing. And this has allowed us therefore to deploy the HC21s in peak demand. So in the multiple frequency market, we take the 7:30 departure and we use the A321. And for the other departures, we use A320 and also Strong markets, we can use the AC21. So right now, our utilization is at roughly equal, the AC21 we use. But clearly, we like to use the AC21 a lot more. It's a very efficient day. Yes. You said unit cost, which I take it as total cost. Basically fuel cost at one time is closer to 25 and total unit cost is probably closer to 10. So I'm saying 8c20neo Versus AXC 21, Neo. Now they are the same engines, so you've got the fuel efficiency. And then the larger number of seats helps you. So that's why the unit costs are down by about 10%. And the 320, of course, it's more fuel efficient. But compared to a 320 Neo, it's Same, Srinivas. Okay. And Neo versus Fuel is another 10%, right, more or less? Neo versus On fuel itself, it's 15%. Okay. Sure. Thanks, sir. Thank you. The next question is from the line of Varun Gilodya from Ambit Capital. Please go So sir, a couple of quick questions. Our first question is on your sequential fuel cost increase. We see that the fuel costs fuel prices are up by 26% Sequentially and your capacity is up by 25%, which adds up to close to 50%. But sequential increase in fuel cost is about 68%. So is there any other reason behind that, if you could just explain that? And second question is on your CO aircraft, older engine aircraft phasing out. That seems to be at a much lower run rate than we would be happy with. So if there are any issues with returning those older aircraft, That's those are my two questions. So let me take the first question, sir. So you're absolutely right. The published rate has Fuel prices have increased significantly by 26%. The other added factor, which is the discounts, which we get on our published rate It's a flat rate. So as the prices go up, that percentage impact on fuel cash becomes higher. So that's the impact you are seeing. The further increase you are seeing is coming out because of that. So in a net net basis, it's all about fuel, which is like where the price is coming And on the And it's visible in the year end results. It's we have not been 100% happy with the tempo of release returns, but if the time is as we speak right now, We have gained momentum. So was it 23 aircraft for which went through this return? And right now, we are really at 40%. So because the last year was major obstacles, single digit growth was The COVID situation, the situation with the MROs and the supply chain, so all this has eased out And we gain momentum in making good what we have lost maybe in this COVID year at the beginning. But now we're confident that we can Finish the backlog, which is still there for us and continue also this coming year with something like what we have envisaged as it leads to terms. So you will see a speed up in this whole process going quarter to quarter going forward. So the run rate that we are looking at will be close to 40, 45 aircraft per year. Is that the run rate we will be looking at? Yes, good run rate, yes. Okay, Okay. Thank you so much. Thank you. The next question is from the line of Arvind Sharma from Citi. Please go ahead. Yes. Good evening, sir. Can you hear me? Yes, we can hear you. Yes. Thank you for taking my question. So I have a question on the Freeport. I think you alluded to a number of 45 per year. What will be the net addition to fleet over FY 2022? Is there a plan number? So our total fleet count will be about flat. So we are taking deliveries and returning CEOs at the same time as in speed. Yes. The total number of seats will go up a little because of the A321. All right. The second question, sorry, I didn't hear it correctly. What would be the daily cash burn rate in 4th quarter versus the 3rd quarter? Sorry, I know you said it, but I just missed that number. RMB190 1,000,000 compared to RMB150 1,000,000. All right. The next question is from the line of Achal Kumar from HSBC. Please go Yes. Hi. Thank you for taking my questions. So I have two questions actually. So first of all, on the demand, of course, last If you remember, I mean, and as we just said, that demand was driven by clear 2 places in cities. And then last year, actually, the fares were quite low And we had seen some shift from train to plane and yet it took 8 to 9 months to reach for the demand to reach about 70% to 80% of the pre COVID level. Now if you see, the more bigger impact it will get to electricity, of course, there's a positive vibe coming from macros. But if you see the non metros like Pune, like the Jeopard and all those shops, cities are still suffering. So how do you see the demand recovery this year? How what makes you confident that the demand recovery could reach February 2021 level in FY 'twenty? Let me try and answer that. So in the first wave, it was a slow buildup and then a slow decline. This one is a sharp buildup and all the analysts will tell you, it's a bell shaped curve, so decline will also Vishal, in the first wave, we also had the problem that people were hesitating about not being sure about airline travel. So the 1st few months, there were like wait and see if your plans are flying, what's going on. That hesitancy regarding airline travel being safe, I don't mean it's there at all. People are paying attention to the COVID numbers in terms of total terms, should I go to the airport, should I take a taxi, etcetera. But with regards airline travel itself, it's very, very people are confident about airline travel. So as COVID cases go up or down, We are really amazed that how strongly correlated it is to demand. COVID cases go up and demand come as soon as But equally, COVID cases go down and therefore, demand goes up just as sharp. So we modeled all this actually. And this is what is giving us the confidence that, yes, we will back to February levels by the end of the year. But then, Mr. Datta, I mean, last year, we had a lot of wins that we were shifting when the fares were too low. And now the Pairs are slightly higher. So the all new marketing are not very high, but the fares are not low enough to attract paying passengers. So don't you think there will be a challenge in terms of getting the same amount of profit, although you're right, you said in the Actually, we don't. Actually, we don't. Because people who are traveling are traveling. They're not being stimulated by Lopez, they're sort of discouraged by higher fares. So there is a pent up demand. And I will tell you like from the latter half of May to the 1st week of June, we've seen a sharp increase again. So it's very, very sensitive to COVID cases. COVID cases are coming down. And we are absolutely confident that COVID comes down, travel is going to go up and we can see it before I. So there's very little doubt in our minds that as long as COVID is controlled, the travel demand will return quickly. Am I audible now? It was breaking. Okay. Is it better now? Can I Yes? Okay. And my second question was around the aircraft economics. So of course, you said that the fuel of course, there are more fuel efficient aircraft. But if you see in terms of leases, of course, I mean, the difference is almost double, right? So, I mean, so looking at net net basis, Where do you see, I mean, do you really think, of course, on the policy basis, you might get some benefit, but do you really see any significant benefit coming out of Does this replacement A320ce over here is only 1 year or So, okay. So there are 2 replacements I think you're talking about. One is the Classic going to the NIO and then from the A320 to the A321. I think from the Classic to NIO, the numbers are clear to everyone, right? It's 15% no costs and fuel, so it's a good deal. The A321 versus the A320 is also a very good transition for us. If you're looking, yes, the leasing costs are higher, but leasing costs per seat is significantly lower in the A321. So and then we have the added advantage that we will mix a fleet with no complexity at all, same pilot, same engines. And yet we can target When we want to use the AC21, when we want to use the AC21. So it's a very good deal for us to have it in our fleet. Thank you. Mr. Kumar, let me just turn the queue. I just wanted to add something. Yes. I just want to add one more element, which Which shows that the cost savings are even can be even higher. When we go back in production, let's say, when we fly 16 times a day between Bombay and Delhi, we could be late for 'twenty one, could reduce it to a quarter. And that saves the money of 2 flights per day. And that's at the same or more capacity. So that shows the whole economics will come back in a much better way, visible When the demand comes back in production comes back. And when Wolfgang says reduce from 16 to 14, the important thing is we now have 2 slots freed up for something else. Okay, next question. Thank you. The next question is from the line of Christopher Cel from RWC Partners. Please go ahead. We are always very pleased. Yes, I just wanted to ask A question on cargo and similarly, I think, on this kind of I mean, with you on this quarter, I just wanted to understand how much I just wanted to understand on cargo, how much more capacity can be entered on Shifters on the capacity side before the printers come online? How much more capacity can we add on cargo? So our freighters are coming next year. In the meantime, we have taken 10 of our airplanes and Converted them to cargo and cabin. So those are being used in charters. We are not planning to add to those. We have 10 with nets and Safety nets inside the cabin. So those are dedicated to cargo plus the leverage ratio, but we're not adding to the fleet in the interim period. Yes. So before the data, Are we going to test more planes, I mean, or secondhand planes compared to cargo or not? I think our existing fleet, Therefore, the cargo in the Delhi is less because we're not flying enough, right? So we carry cargo in Delhi, we carry cargo in cabin and then we have the freighter. The cargo in Delhi is being suppressed because we're not flying enough. The cargo in cabin, we have 10 airplanes, which we use for charter operations. We're not planning to add to those. And then we have the 4 freighters with the 1st freighter coming early next year. Got it. And on the cargo yields, I mean, are they kind of what sort of trends are we looking at? Cargo yields have been very good overall for the past 12 months. But at this point, they seem to be flattening a little. But as we reported, our overall cargo revenue is up almost 10% year over year. Okay, got it. Thanks, Ronald. Thank you. Thank you. The next question is from the line of Aditya Mounghia from Kotak Securities. Please go ahead. Hi, everyone. I had two questions. The first one that I had was more on The share of capacity that IndiGo would be having let's say a year or 2 down the line Versus where we are at this point of time? Sorry, the question was clear to me. The share of capacity again, can you repeat that? Yes. So in terms of speed, in terms of capacity, what would be the share of Enteko, let's say, 12 months down the line or 24 months down the line? You could give us some sense versus where we are at this point of time? With the investment. Are you saying our capacity to the industry capacity? Exactly, the fleet, yes. Your fleet was in the market as such. That is impossible for me to protect. We can talk about our own capacity, But Goa is buying airplanes. I don't know what Air India is going to do. Truly, we don't know what the competition is going to do. We can only talk about the occupancies. I got that. The second thing that I had, Sophie, so the question that I would want to kind of put would be Also on the money that is being raised or is being thought to be raised, Given how you are thinking through demand driving Priti, so is it more of an insurance again something bad happening or do you think that this kind of Money3000 crores is actually going to be required? So we've had extensive discussions on this at the Board level, of course. And the fact is, it's hard to predict the future right now. It's a very volatile environment. 3rd wave of COVID Could or could not arrive, so we don't really know. Therefore, you're right, it's mostly in insurance. It's not like we feel like we absolutely need the money, But strengthening the balance sheet is always a good idea. As you know, major corporations in this country and around the world are doing it. So it's all an attempt to strengthen the balance sheet even further. Got that. If I may, can I ask one question on the capacity? Sure. So, Navane, you mentioned pent up demand and that being the possibility driving volumes, Let's say in FY23. I just want to ask you, this is your assessment of where capacity for Indigo and others is and will be. Is there a possibility of a demand supply mismatch on the other side? On the other side, meaning The demand is higher. The demand is higher, the capacity isn't up to match up for it. Look, The spend up demand is a real factor on the table. Let me give you an example. Male, we used to fly Bombay and Bangalore. And we've looked at and analyzed Delhi and Chennai and it never worked. Like Delhi and Chennai, there's nothing of demand. When we come out of this Sort of 1st wave in February, March and suddenly Delhi and Chennai show immense potential. That to me is an example of where there is a lot of pent up demand, whether we're talking of Thailand or domestically travel, there is a lot of pent up demand. So yes, I think there is a potential that for the industry as a whole, we could be short of capacity as well. We just don't know. The next question is from the line of Anshooman Des from ICICI Securities. Please go ahead. Yes. Good evening. Thanks for the opportunity. I wanted more color on the liquidity schemes which are available to us because last This year we had managed it extremely well. This year, you were paying about RMB45 1,000,000,000 of Available liquidity which can come from S&P and other measures. A, if you could highlight on that part a little bit, what are the revenues under that? 2nd is that, in some of these, we have been paying to all our lessors on time. What are the other ways maybe through some tactical negotiations, etcetera? Can we kind of get to some more liquidity? What are the basically liquidity sources available to us at this point of time? If you could share some color on that. That will be it. So As I mentioned, we have got this RMB 45,000,000,000 is what we have visibility today. And these are clearly on the table. And we have already been almost in discussion and we closed on few things around this. Beyond this, there are discussions which are going on. And we continue to explore options beyond this. Credit lines, there are lots of banks we are talking to. There are few who have formed up, there are few who are still talking to and those have not been considered. Similarly, from financing perspective, we have got something on the table, a few things which we are still discussing with our vendors. So on an overall basis, I think we are in a very competitive position as we start off today because our numbers along with QIP number at the start of the year seems fine for us to carry forward, but we are not stopping any such ways to Explore more possibilities and maybe as we go along during the quarters, you'll see us calling out more numbers beyond the numbers we have already reported. Right. And is profitably only SLP profit or is there any breakup of this available? So it's a mix of credit lines and S and P. Right. And the last question on that one is if you could share out what is the debt It's there in the report we have given. Sure. I'll do. Yes, we can have one. Okay. That will be all. Thank you. Thank you. The next question is from the line of Vinay Singh from Morgan Stanley. Please go ahead. Hi, team. Thanks for the opportunity. The first question is on the cargo side. Could you talk a little bit about what kind of industry growth do you expect in cargo? And what kind of a market share will Induvo have within that with the cargo planes coming onboard? That's the first question. I don't think we have the answer on the market share yet. Just to tell you what's happening on cargo. The overall dynamic is that there used to be a lot of white bodies flying around in India and outside India, which used to carry a lot of cargo to them. Since the device only count has gone down, that's why there's a demand for cargo traffic and that's what we are tapping into. So it's not only domestic, it's also international. For example, traffic from Vietnam or Bangladesh trying to go to the Middle East. It used to go on the whiteboard before. Now it is coming through, sorry, on narrow volume. So that's where we are seeing a lot of growth. It's Really the wide body capacity has been going down, but it's creating this generation. It's not like cargo traffic overall has improved, But the mode of transportation is shifting towards Narabos. And market share data and all that, frankly, we do not have. We're doing a study on all that and looking at all the opportunities. We've done our first step in terms of the 4 freighters, But we have a broader study going on, on a long term set of plan for the cargo business. And sir, linked to that, is there a risk when the cargo use drop Once the environment normalizes because almost every airline is focusing a lot on cargo and in a normal environment I would assume the wide body to also come back. So is there a risk on the cargo unit that we are seeing today? Well, again, with the wide body planes, I travel across the world, right? I mean before they used to be carrying a lot of one stop traffic. Let's take an example of the Middle East carriers. They used to carry passenger traffic from the U. S. Towards the Middle East to India. And now that is coming non stop From the U. S. Side. So the one stop traffic is in trouble. So I don't see the whiteboard is coming back in the same sort of magnitude as they were I think this is a permanent shift in my mind. Thanks. That's helpful. And the second question is on the regulations in India. So this time in the downturn, you're seeing the regulators step back in. In your view, when do you see regulators pull back? Because like Is there an understanding with the industry that once we go back to pre COVID levels and the cap and the share flows and all those things will go away? I think the Minister, Mr. Puri has been quite articulate in that regard. He has said consistently that this is a temporary measure. We want to get out of any kind of regulation. So he says that in every public That's helpful. Thanks. That's all my time. Thank you. The next question is from the line of Fatima Garamath from UPI A and C, please go ahead. Yes. Thank you for taking my question. Sir, in your opening remarks, you did mention that In the near term, the international segment, there's a lot of uncertainty in that segment. But over the longer time period, what are your plans of So expanding your business in the international segment in terms of adding new destination and whether it's long haul or short haul. And also if you could give a sense about the profitability of your international business versus domestic and how do you see that going forward? Thank you. So let's go back to the pre COVID period and start from there the benchmark. So in the pre COVID period, We were expanding internationally aggressively and international was accounting for 25% of the total capacity. It also had higher margins than domestic. So highest growth, higher margins, which is a wonderful combination to have. That's why you are very bullish in terms of international expansion. Now our plans are already there for doing that. Our fleet is in place to do that. So as soon as this COVID crisis is over, we plan to sort of restore our original growth path in terms of international. And let me say that we talk about this wide body competition decreasing. Especially during this COVID, we are getting demand from such sort of esoteric places, if you will, which is giving us a very good sense of the traffic, which was being carried before one stop to other hubs, which we can now carry non stop. So our growth plan again is in that 6, 7 hour range From Delhi, Mumbai, Chennai, Bangalore, Kolkata and every major city in that circle falls into potential market. So it is being delayed, of course, because of COVID. There will have to be some sort of understanding between governments about travel through the passports or some way of shape or form. But once all that stops out, I think we'll be going into international markets with rapid sort of growth. And again, as I said, pre COVID, our international margins were higher than the domestic margins. Sure. Thank you for that answer. Thank you. Thank you. The next question is in the line of Rahul Abirwal from ICA Capital Life. Please go ahead. Good evening, everyone. So I've got a couple of questions. My first is with regards to Please raise the hand for the question. Is this better? Yes. Much better. Yes. Thanks. So from what I see in the balance sheet, We've got a INR 145 crores asset held for sale. So if you could just give some sense of what it is and if you are Setting 145 only or there could be some upside to it? So this is basically this is one of the Engines we had, which had to be which is already the agreement was signed and it has not yet been converted into an SLB. So that has been shown as on 33rd March as of April 1st. So there is nothing more beyond that. So this is only this was a transaction which happened which was not completed at the end of year end. Had it been completed, we are not. Okay. And my second question is with respect to the tax credit that we don't have. We are not carrying for the last four quarters. So we are almost at 0% tax credit. So will this be used against the liability that could come up in reverse, Vishwan? So I'm not clear on the question. So tax credit, can you just elaborate on that question, please? So what I'm trying to understand is that, regardless, Ishwar, we have said that the liability could range from INR 400 crores to INR 1400 crores. And I have seen that no tax credit in terms of the loss, no tax credit is being carried forward, Which could be used later for our So basically, let me try and understand this question. So basically you're saying Because of Vivace, Vishwad, I am not charging any tax amount into my P and L. Is that the question? Yes. So I'm just trying to understand whether the tax rate is being adjusted with the Vyas and Vishwas and we do not really have any tangible cash outflow. That's what I'm trying to So let me explain you. So this 2,008, 2009 assessment year, we had losses. And those boxes we have set off against future profits. So what has happened is Our reduction in losses has resulted has actually cost offset with the math credit which we have written off subsequently, which otherwise we would have had to charge it into the P and L. So looking at if in an enormous circumstances, if we had carried if we had just taken this ESGIS Neel and agreed on that. We would have had to pay some cash flow today. However, because of the write off which we had taken on that credit, I think last year that sets off my past fiscal year, which results in no outlook for the company. Okay. And the last three, four quarters, the tax rate that we have seen, there is no tax credit being Carry forward, any particular reason for that? So we don't have any visibility as a you don't provide you don't carry any Tax Credit based on normally look at 1 or 2 years right now, you are in a situation where the Future profitability and future revenues are under the COVID. So everybody is looking at that. So you assess it every quarter And take a charge into the books as per that. The current situation is that we are into COVID, we are into losses. So We are being more pessimistic and we are not recording any income on that. All right. Thank you. Thank you. The next question is from the line of Prashant Kotari from Pickup. Please go ahead. Hi, Martin. Akash is around the liquidity situation again. And I just was wondering how did you guys come up with this Number of INR 30,000,000, I mean, if there's some kind of some rules, some formula, which kind of helps you to think about much liquidity we need on the balance sheet and also kind of as a corollary, as we keep growing our scale, will we need more of cash on the balance Think of free cash or do we think of free cash less the debt we have? How do we think about these things? Thank you. So how did we come up with the number of $50,000,000 We have a worst case scenario of how low should the cash could the cash flow. And we also have a number in mind of we are not willing to tolerate the cash from dropping below this level. That level actually compared to most of the airlines is quite high. So we have pretty conservative that we need a minimum of this amount of cash. Now frankly, we don't have any scenario which says we'll go below that. We've done a pessimistic scenario of blah, blah, blah, and it's still just about there. But then the question that the Board asked is, what about extreme cases? What if there is a 3rd wave COVID? What if there is another 3 months for down? What if international doesn't open for 2 years? Now those truly are No one can model, Frank. So it's against those extreme cases that we're saying that have this cash balances and insurance. It's almost like a disaster Insurance, if you will. But beside all that, we think it's good idea to have a lot of cash on our books. We want to have a strong, strong balance sheet. And we're going to do everything to make sure the cash liquidity comes through revenues and not anything else. But if the revenues were to shut down completely for whatever We still want to have a strong balance sheet. So we came to that answer of INR 2,000 based on that. What is the worst case scenario that we can think of? We still want to have a certain amount of cash and therefore we came up with this number. But it really is disaster risk to insurance. Right. And is it that you think about Free cash on a gross basis or on a net basis like free cashless BTech here? So free cash is the cash which is available for us to spend, right? So that's the way we look at it. Now I'm not sure when you say net basis at gross basis. Yes, free cash also takes care of when I look at my liability, current liability, which I'm going to pay in next few months. So that we obviously keep in our mind. But that free cash takes care of that. When I look at my balance sheet in a particular date, we have that visibility that what how much it will cover From that day onwards. So for us, free cash is the cash which is available for us to use any point in time. The next question is from the line of Pulpit Patti from Goldman Sachs. Please go ahead. So thanks a lot for taking my question. Sir, a couple of quarters back, you used to talk about where our cash burn would be. So did you Did speak about the INR 19 crores or which was the cash burn in the March quarter. Any guidance of what their numbers could be for the next Couple of quarters, your daily cash burn. I don't remember giving that guidance. And frankly, the answer is that I don't know. Sometimes no. Yes, we've been very speculating to give that number. Thank you. Absolutely. You cannot give a guidance of cash flow going forward. But obviously, the situation is there, the COVID situation, the revenues are not there. And we have already called out that We expect that our cash flow is going to be higher in this quarter at least. Sure. Now you used to say that it was about INR 40 INR 1,000,000,000 a day, which you would bring down to about INR 30 crores. Anyways, my second question is related. Can you give a sense of what levers of cost cuts We have. As you rightly highlighted, nobody knows if there's going to be a 3rd wave or not. So what other levers do we have in terms of Cutting costs further, assuming the worst case scenario of this thing prolonging? So look, fuel is obviously our biggest line item. And just reducing fuel consumption This is a big deal for us. So we are focusing on that. And Loycross, unfortunately, we've taken a lot of pain already. As you know, we had a layoff, We had paid cuts and we did another leave without pay. So I mean the amount of further paying we can Accelerating that is very, very minimal. Then we are looking at every other opportunity, including aircraft ownership costs, talking to the missiles, What sort of deals we can get? And then all the other non discretionary costs. So everything that we have, we're cutting back on. But I won't hold our breath in terms of we have major, major opportunities to reduce the unit cost further. What What we need to do is get the airline going and get more on the revenue side quickly. Fair point, sir. And that answers my question. Thank you. Thank you. The next question is from the line of Sonal Gupta from LNG Mutual Fund. Please go Yes, great. Thank you so much for taking my question. First, I just want to understand in terms of the I mean, like given the sale and leaseback that you get on these new planes, I mean, even if the plane is standing for a year, does it still make sense for you to take a new plane? I mean, I'm coming in context to the fact that Last year you had guided for a flat fleet count and our fleet count has grown by 9%. So just trying to understand that. Yes. And the answer is yes, we've looked at all that very carefully. And no matter what scenario we look at, we It's a little bit different now. And it's not like, oh, in 6 months, we start bidding on that cash that we got. No, it's a much, much longer term than that. Right. And just my second question, I had a similar question last quarter was like, I mean, like given that the industry Scenarios and the demand like you're saying is not getting stimulated, it's more of people who want to fly flying. What is the ability, I mean, do you see to Raise yield, especially in the scenario that I mean historically we used to operate 85% load factor, but maybe for the foreseeable future We will have to probably do a 75 or something. In which case, are we going to adjust the yield to at least get a commensurate level of profitability and that sort of growth factor? Yes. So I think yields in India are really the lowest in the world, I think, and lower by about half. Average fares in for a low cost carrier like Spirit or Southwest in the U. S, which is $130,000 $140 In India, it's like $60 So and yet our cost structure, as you know, is on aircraft and fuel is the same. So we don't have much room to go down, frankly, and without more blood on the streets and more airlines collapsing. Then there is all the issues of middle class growth of people substituting from rail to air, etcetera. So I think over time, not in large numbers, but I think we'll generate them to break up words. Okay, great. Thank you so much. Thank you. The next question is from the line of Ankur Sharma from HDFC Life. Just one question on the employee cost. When I look at the capacity, there's a Vasily, there's a 25%, 26% increase quarter on quarter, but the employee cost is kind of, I'd say, 735 And then for a few color number, both in Q3 and Q4. So if you could help me understand what's going on there? And also for 2022, what's the kind of number you're looking at on an annualized basis? Okay. I'm not sure I understood your question, but to the extent I understand it on employee costs, what has happened, as you know, first of all, we Took out 15% layoff. And then we all took severe pay cuts. And then we all added this leave without pay. So year over year, our employee costs are down about 30% and that's stabilized and stayed there. There was a second follow on question. I can follow that. So my question was, despite the increase in capacity in Q4 by about 25%, Your employee costs are flat on a Q on Q basis. So why is that? Is it because you've not taken any hikes or Are they under the same levels as Q3? And what would be the number you're looking at for FY 2022 on a full year basis on employees? Yes. So for the following year, the first thing we'll probably do is get rid of the leavers out there. And then gradually we'll bring the pay cuts back. So it's impossible for me to predict what the number will be, But it will still be lower than before, but the 30% is not sustainable. We need to climb back up. But I don't have a forecast for where to end up. And a quick question on the quarter 4. It was it's flat because obviously we did not reinstate the cuts which we had done. So we could continue. Ladies and gentlemen, that would be our last question for today. I would now like to hand the conference over to Mr. Ronald Zappa for closing comments. Thank you and over to you, sir. I just wanted to conclude by talking broadly about what the situation we find ourselves. And many people have asked me why are you so optimistic about Indigo and I just want to highlight why that is. So let's look at the broad drivers of our performance. 1st is fuel. Fuel, as you know, is our biggest cost, I suppose. And our cost per client is down 10%. So that's a big deal, I think. And it will continue to get better as we take more and more and more. Then you said cargo. Kaizo was always a small item on a piece now. It's becoming a bigger and bigger piece. And that again is a structural change that is here for some time. Yields, as I said, yields are very low in India and I don't expect to see a dramatic change, but yields will only get better over time. The AC21 is camouflaged in all these statements. The first three you can see in our statements. You can't see the AC21 effect. But again, the AC21 effect is driven by 2 things. It is more efficient cost wise and it allows us to in a very targeted way to fly on the right And then there's a quality of flying and customer service that we are offering. We are number 1 in OTP by far. Our Complaint ratio is the lowest it has ever been. Our Net Promoter Scores are higher. So all the broad matrices of the performance are in the right direction. There is only one negative. And the one negative is that there are not enough customer load prices. Now the positives that I talked about are all structural. They are here to stay and probably get better over time. The one negative, which is the customer load, It's a very short term cyclical factor. So it is going to reverse and when it reverse, the structural advantages for customer loads in terms of, As we said, railway substitution, when you think some growth, etcetera, will show up. So there's only one thing we're waiting for, and that's for the load back into No, and we all know that it's going to do so at some time. So overall, I really think this is almost like a Cinderella moment for Indigo, Yes, the bottom line looks ugly, but very soon things are going to get a lot better. Thank you. Thank you very much. Ladies and gentlemen, on behalf of Indigo that concludes today's call, thank you all for joining us and you may now disconnect the line.