Earnings Call: Q2 2021

Oct 29, 2020

Good evening, ladies and gentlemen, and welcome to Indigos Conference Call to discuss the Q2 of Fiscal Year 2021 Financial Results. My name is Aman, and I'll be your coordinator. At this time, all 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'd 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 Q2 fiscal year 2021 earnings call. We hope that you and your families are safe in these difficult times. We have with us our Chief Executive Officer, Ronanjoy Gatta and our Chief Financial Officer, Aditya Pandey, to take you through our performance for the quarter. Wolfgang Tokshawa, 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 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 within an hour. The transcript of the Q and A session will be uploaded subsequently. With this, let me hand over the call to Ronan Datta. Good evening, everyone, and thank you for joining us on this call. I trust all is well at your end. We reported a net loss of INR 11,900,000,000 in the September quarter compared to a net loss of INR 10,600,000,000 in the same period last year. Given the government restrictions in place for capacity deployment, we could only deploy around 37% of last year's capacity. We were able to add capacity throughout the quarter and ended up in September at around 47% of last September's capacity. As you all know, Indigo has always been an exceptionally well run airline. And since we were restarting the airline after the lockdown, we were determined to use this opportunity to get better at everything we do. Thus, we set aggressive goals for ourselves for improving our product delivery, customer service, brand value, employee engagement, cost reduction, liquidity and revenue generation. I would like to share some of the specific changes that our teams have implemented since the restart of operations. Our operation team developed new processes for customer service to ensure the highest standards of public health and safety. Our digital team is on an ambitious plan for digitizing all customer touch points from initial reservation to back delivery. The new mantra of our digital team is no more paperwork, no queues or phone calls. Let's digitize everything. We launched all cargo flights as a standalone revenue stream. Somewhat incredibly, we are now carrying more cargo at much lower capacity than we did at 100% capacity. We set sensible goals for cost reduction and are making good progress on several funds. Once you get our capacity back to reasonable levels, our unit cost will probably be lower than what we had before the operational shutdown. We focused on our cash balance as a key priority. Aditya will give you an update on our cash position and cost reduction measures when he takes you through the financial performance in detail. Our commercial team has absolutely freshened a new network that absorbs all the capacity restrictions and yet maximizes revenue. Simultaneously, we've been able to transform ourselves from purely scheduled carrier to 1 also adding charter operations as this has significantly enhanced our revenue performance. Our operation teams set higher goals for on time performance, customer complaint handling and baggage delivery. Since June 2020, we've been number 1 or number 2 in terms of on time performance. We continue to return our classic engine aircraft, thereby increasing our overall fleet efficiency. We wanted to improve our brand perception. Our lean teen flying machine seems to be having a lot of traction in the marketplace. While we wanted to design an even better and upgraded Indigo, we very much wanted to preserve our greatest and most critical strength, which is our tightly bonded and enthusiastic employee culture. I'm pleased to report that we are encouraged with the progress we are making on several underlying measures of strength. We are ranked as the safest airline in India by the Safe Travel Barometer, which is the world's most comprehensive database for COVID-nineteen traveler health and safety and has released the safe travel scores for airlines worldwide. Our Net Promoter Score continues to improve and is even higher than the last quarter. Further, improvement in our product has resulted in a higher customer preference for our airline. And as a result, we are carrying higher number of passengers at around 58% of domestic passengers in September versus 48% in January. I'm pleased to be able to report that Indigo is now positioned as the 33rd most valuable brand in India by Campaign India. This is a significant jump of 52 positions from a year ago. Our internal employee engagement scores are at all times high. It is heartening to know that employees feel inspired and motivated even during these difficult times. Our low levels of aircraft synchronization continue to remain a major concern and the fact that we were only able to fly around 37% of our capacity had a significant impact on our financial performance. However, we've been gradually increasing our capacity and we hope to be utilizing 60% of the Q3 fiscal 2020 capacity in terms of ASKs in the Q3 of 2021. Talking about the revenue performance during the quarter. On a year over year basis, our yield has improved by almost 9%. But our load factors are down by 18.5 points, leading to a reduction in RASK or unit revenue by 5.4%. I'm pleased to note that our September end free cash balance was INR 69,700,000,000, which is higher than our internal forecast. We acknowledge that we still have a lot to do in terms of complete recovery to pre pandemic levels. But I'd like to assure you that this management team is working diligently to address all the risks and opportunities that are on the table. And with that, let me hand over the call to Aditya to discuss the financial performance in further detail. Thank you, Ronu, and good evening, everyone. For the quarter ended September 2020, we reported a net loss of INR 11,900,000,000 compared to a loss after tax of INR 10,600,000 on a year over year basis. We reported an EBITDA of INR 4,100,000,000 compared to an EBITDA of INR 2,600,000,000 during the same period last year. During the quarter, we operated at 36.7% of our year over year capacity, is somewhat lower than our previous guidance of 40%. The gap was primarily driven by capacity restrictions imposed by various state governments for a considerable part of the quarter, which had an impact on the pace of our capacity deployment. The key highlights of our performance during the quarter can be summarized with the following points. We operated at a load factor of 61.1%, an increase of 3.8 points as compared to the previous quarter sequentially. On a year over year basis, our yields increased by 8.9 percent to INR 3.83. However, our RAS reduced by 5.4 percent to INR 3.24, primarily driven by reduction in our load factors of 18.5 points. Our passenger and cargo charters continue to perform well, adding to our overall revenue performance. Our fuel cash decreased reduction in average ATF prices on a year over year basis. Our overall fuel management policies, including a mix of efficient engines, effective purchasing contracts and initiatives for reducing fuel burn are one of the bright spots in our performance. Our ancillary revenues, including cargo, continues to be strong, helping us to generate much needed revenue at this time. Moving on to the most important update on our cash position and liquidity. We ended the quarter with a free cash of INR69,700,000,000, reduction of INR5,600,000 as compared to free cash at 30 June 2020. As we have added more capacity, our net cash burn per day reduced from INR 300,000,000 per day in June 2020 to an average of INR 250,000,000 per day in the quarter. We have spoken about various liquidity initiatives totaling to INR60 1,000,000 in our past calls. During the quarter, despite a tough environment, we have secured sanction for working capital from a bank that can help infuse additional liquidity of INR6 1,000,000,000. This sanction also demonstrates the faith lenders have in our balance sheet and resilience of the company. Of the INR66 1,000,000,000 of potential liquidity increase, half has already been raised and the other half will be raised in the next couple of quarters. We continue to work on more options to enhance liquidity even further. While our Board has approved raising of funds by way of qualified institutional placement, aggregating INR40 1,000,000, we are currently looking at all debt options before we take any decision for this fund raise. Further, on the basis of the current revenue improvements, we are deferring the decision of QIP till the end of December 2020. Now let me give you an update on the cost front, supplementary rentals and maintenance costs. This cost comprises 2 major components. Cost is a supplementary rentals that are largely variable and second, other maintenance costs that are largely fixed event based. Given that we have deployed only 37% of our capacity compared to the pre COVID period, this number is lower than historical levels. We expect this number to increase as we keep on deploying more capacity. Our payroll costs reduced by 35.5% as compared to the March quarter as all our initiatives on payroll cost reduction have taken full effect in this quarter. On the other key balance sheet numbers, we ended the quarter with capitalized operating lease liability of INR229.3 billion and total debt including the capitalized operating lease liability of INR254.2 billion. In summary, we are in a stable position with respect to our liquidity. Our costs have come down and the increase in capacity is further improving our net cash burn. However, we also understand that times are still unpredictable and we need to continue to fight a battle against this pandemic. With this, let me hand it back to Ankur. Thank you, Ronu and Abhijitya. 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. And with that, we are ready for the Q and A. Thank you very much. Ladies and gentlemen, we will now begin the question and answer session. The first question is from the line of Sonal Gupta from UBS. Please go ahead. Yes. Hi, good evening. Thanks for taking my question. Just wanted to understand, one, in terms of the I mean like what I was trying to understand is what is the clarity there is now on the international operations because when you're guiding for like 60% utilization of fleet and last year almost like 25% of fleet was sort of deployed on international. So I mean, you're sort of implying if there was no international that almost 80% of domestic would be sort of back. So just wanted to get what is the sort of clarity on the international side? How do you see that ramping up? So let me answer the question more broadly on overall capacity because I'm sure there'll be other follow-up questions on this. So first, let's talk of domestic and then I'll also go into international. Domestic at this point, as we said last quarter, we ended September with about 47%. Today, as we speak, we are close to 60%, slightly short of 60%. Now all indications are that the government will be lifting that capacity cap, which right now is 60% domestically, to around 80% soon. We don't know when that will happen, but we are encouraged by the discussions that are going on. So our best guess is domestically, we'll be at 80% capacity by the end of the year early next year. Now let me talk about international specifically. We have been doing international in various ways through as you know both Vanjie Bharat flights, charters and double flights. How much exactly are we doing? Well, September over September, if you look at all international flights, we are about 20% of last September. Last September to this September just where we are. The government continues to increase mobile flights, Bangladesh is opening up and so forth. We know there'll be no scheduled service till the end of November, at least. After that, how quickly it will progress, we don't know. But to answer your question right now, we are at about 20% internationally and then we'll have to wait and see. Domestically, we are more little more aggressive in terms of our expectations. Sure. Thanks. I'll join back with you. Thank you. Thank you. The next question is from the line of Ashish Shah from Centrum Clothing. Please go ahead. Yes. Thank you for the opportunity. Just wanted to check-in terms of the lease rentals, which we would have deferred during the first half. We see that in the cash flow statement, there are probably about INR1300 of lease rental payments which are reflected. So how much of the rentals will be deferred here and not reflected in the cash flow? So as we said, even during the last quarter, we have not deferred any lease payments. So we are current on all our lease payments and we continue to honor them as per the schedule. So we were current in 1Q and we continue to be current in the 2nd quarter as well. So there is no pendency on the lease payments as such. Sure. I'll come back in the queue. Thank you. Thank you. The next question is from the line of Lokesh Galk from Credit Suisse. Please go ahead. Hi, sir. Okay. So asking a question on fleet plan. Basically, we had seen fleet continue to grow our leverage utilization, as you said, remains in the 37% range. So should we expect a large bunched fleet sort of leased plane returns at the end of the year? And there are things coming up currently also, which is both NIO and 321 NIOs. Is there any update that you can share in terms of renegotiation with Airbus So we always had a plan to return the classic serial aircraft and we are still on track on that. We're returning them as fast as we can but according to our old plan. And then between our operation team and maintenance and aircraft finance, they've done a great job in terms of despite the disruptions that you've seen worldwide. A lot of planes have been placed with MIRs across the world in terms of returning to the airplanes. So we are on track on that and those numbers are quite large, over 30, 40 a year and we continue to return those. As far as the deliveries are concerned, we are not doing any major renegotiations with Airbus. We are taking whatever was on plan. There is a push pull every month to month because they want to delay 1, we want to estimate 1, but largely we are on track. So our fleet plan is very stable. It hasn't changed much and we are proceeding according to our plans. Sure. So basically between, let's say, June to September, there is only 6 CEO claims that seems to have reduced. If the plan is to do 30, 50 each year, then lot of them would go towards December, is it? Gunjan, you want to take that question? Yes. You are basically, you are on the right track, so to say, because if during this lockdown situation, there was a slight delay, but it was always on track. And now the returns are catching up, and we see it getting the lease returns, getting momentum. So we can balance whatever comes in, we balance somehow with lease returns. And that's our strategy with this fast return cycle that we keep make our fleet younger by the way, by this way, and stabilize the fleet, as Gorno has mentioned. Sure. I'll get back in the queue for more questions. Thank you. The next question is from the line of the Deepika Mundra from JPMorgan. Please go ahead. Hi, this is here and thanks for the opportunity. Yes, slightly better. Thank you. The next question is from the line of Vipul Gug from Kotak. Please go ahead. Hello. Sir, thanks for the opportunity. The question is that how the cash position because we at present this quarter we had a loss of about INR 1100 crores, out of which INR 500 crores was boosted by the forex scheme. So effectively loss of INR 1600 crores if we leave aside the forex part. But the cash portion is not has not decreased by that much amount. So whether any monetization, health, etcetera, has taken place? And then there's a second question regarding the supplementary rentals. The though the flights have improved vis a vis Q1, supplementary rental amount is same. So is any renegotiation or some deferment has taken place on the supplementary rental part? So I'll take these. So you're right. I mean, we have infused liquidity. Even if you recall, at the end of last quarter, we had mentioned that we will generate INR 6,000 crores of liquidity. So we have infused some liquidity out of that, including selling some of our assets, as we had called out earlier. So that's where you see the delta between the losses and the net cash burn. So our net cash burn from INR 7,400 is down to our cash is down from INR 7,400 to INR 6,900. So net cash bond for us is RMB 500 crores for the quarter. So that's your answer to your first question. So supplementary rentals between Q2 and Q3 are up. They are up by about roughly INR 100 crores and that's primarily driven by the fact that we put more capacity. And since we put more capacity, supplementary rentals driven by capacity have obviously increased. So you've seen an increase. It's not to the range of where it originally was in March or in periods which were prevailing earlier. But there has been an increase largely driven by capacity. So last quarter, this number was INR 739 crores. This has gone up to INR 842 crores in the current quarter. So, Anir, I think there was some deferment of the supplementary rental. So still that deferment is continuing. So the way to think about deferment of the supplementary rental is that we neither owe them as well. So how the process works is that we will put out an LC upfront at the beginning of the year and that reconciles at the end of the year, this is the usage of the aircraft. The fact that we are not deploying capacity anyway because of the situation, we have worked with our lessors to make sure that we don't put up those LCs as well. So effectively, we're neither putting them up nor repaying. So it's not as if there'll be a catch up of this after 6 months or 9 months. Okay. And sir, how much monetization was done during this quarter? So we did our overall monetization of INR1800 crores in the quarter. In the quarter. Okay. Thank you, sir. Thank you. The next question is from the line of Ashwin Kumar from HSBC. Please go ahead. Yes. Hi. Thank you for taking the question. I had 1, so first of all, on the cash, just taking the last question forward. So I can see that the old aircraft has reduced from 2019 to 2022. So does that mean you have done the sale and leaseback of all the unencumbered aircraft and you don't have any more aircraft to the sale and leaseback? No. We've got 7 more ATRs that we're going to put on a sale and leaseback structure in the current quarter. What we have done so far are 4 ATRs and 3 CEO engines that we own CEO planes that we own. And that's what you're showing INR 1,000 crores in your cash flow statement, right? Correct. Okay. The second thing I also want to understand the PDP burden. So now what is the status of your CSM engine and what kind of PDP burden you see due to the CFM and due to new aircraft coming in? Is there any change in the PDP burden because the leading market is changing? So what kind of PDP burden you are expecting? So there is no incremental PDP burden on us. I mean, this is as per our contract that we have negotiated with Airbus and we continued on the same path. It's neither gone up nor has it come down. So we continue with the same PDP payments that are as per our contract and plan with Airbus. Even with the CFM? Yes. I mean, this is with Airbus. I mean, these payments are through Airbus. CFM is an engine provider to Airbus. So whatever our contract is with Airbus, we continue down the same path. Okay. Right. The last question I wanted to understand about the yield because the fares remain so low and still the yields are very high. So basically what is the situation with the underlying yield and what is it that is feeding into this yield to be so strong? I'll let Sanjay answer the question since he worked his magic. What do you do, Sanjay? Look, yields are better compared to last year, same quarter. And I would continue this to be basically the directional demand. If you remember in the Q1 of the year, we had people moving out from metro to 1 metro and the hotel cities. But now what we saw in the quarter 2 was classically turning back to the metro. So that was one reason we saw huge demand in those markets from nonmetro to metro. And then also there was a limitation on the capacity side. There is still some constraint as far as some markets are concerned like Calcutta and Mumbai, which are still constrained due to the local state regulations. And that is also because of lack of capacity in those market, we are seeing better yield. So overall, it is the combination of lesser capacity, increased demand in the marketplace, which will kind of help us in terms of ease of growth. And I would add to that, the charter yields have also been very good. So we're pushing that as hard as we can. It's a combination of all these. I mean, charter also is an important aspect of this. Look, we said always that as we start, we will design the network as artfully as possible in order to pick the right markets, the right frequencies. And that's what you're seeing in the improvement. I think the commercial team between planning and sales and revenue management, they've done a great job in picking all the right destinations and schedules. Right. I'll ask questions, but I'll come in the queue. Thank you. Thank you. The next question is from the line of Deepika Munza from JPMorgan. Please go ahead. Hi, thanks. I hope you can hear me now. Just a couple of questions for Mika. So firstly on the ASP, I think last quarter you mentioned 60% to 70% in the December quarter should be operational. Now you're mentioning 60%. Is there a point, you know, is it are your expectations slightly lower for the festive period? And secondly, on the yield, I mean, last few quarters have been very strong. As more of your capacity comes becomes operational, do you see this advantage dissipating? Okay. So let's clarify the capacity issue. We are close to 60% right now as we speak today. We're not at 60%, we're at around 58%. So we're not saying 60% by the end of the year. Now can we go above 60%? That will depend mostly on the government because we are capped at 60% right now. We are hopeful that the government is going to increase it to 80% in the next couple of weeks or so. And if the diamond dies, then we'll be at 80% by the end of the year. I hope there's no confusion on that. We're at 60% now, hope to get 80%. As to the yield, what happens as capacity goes up? One of the problems we are facing, of course, is normally, as you know, we like to have a 3 month booking curve. So when we open new capacity, we said let it book for 3 months before we actually start flying. That's obviously not happening today. So if the government says add 80, we'll go to 80 within 10 days, which means 10 days of booking. So obviously, it starts off somewhat soft, but then it picks up very quickly. So that's why we're saying we are stair stepping our way to higher revenues because it's not moving smoothly. It's like, okay, the government says 45, we are 45, the government says 60, we open up a bunch of new cities and schedules on frequency. They don't book immediately, obviously. So there is a lag for 2 weeks, but then it picks up nicely. So that's what we're seeing. And if the government now goes to 80, we'll have a temporary stall, if you will. Our revenue won't immediately go up. But it seems to go up in 2, 3 years. That's why we're quite positive on it. Okay. I think it's important to make this statement. Back in March, we had no idea what's going to happen, right? I mean, we had all these scenarios from things are really bad to things are getting better correctly. The good news is given the last 4, 5 months experience, all those really bad scenarios are off the table. Yes, things won't get great quickly, but things are definitely not as bad as we might have feared back in March. So all that gives us room for some optimism. The next question is from the line of Binay Singh from Morgan Stanley. Please go ahead. I think thanks for the opportunity. Apologies in case his question has already been answered. But what will be your average cash burn for Q2 per month? Like in Q1, you were saying this was around $120,000,000 So our average cash flow for the quarter is INR25 crores. This number was INR30 crores a day at the end of last quarter. Okay. And the salary number that is being reflected into the quarter, is it reflecting the staff cuts that you had had? Yes. The staff cuts got effective this quarter, so that does reflect the staff cuts as well. It actually captures 3 things, the staff cuts, the pay cuts and the leave the door space. All those three things are coming into line. It's a combination of all the 3. So in a way, this number will not fall further, it should largely remain around this level? So yes, it will not change too much. But I mean as capacity comes back, I mean the leave without pay may settle back a little bit. So there'll be some differences around that. But it is I mean, we're sticking to our earlier guidance of this being 30% lower than the pre COVID levels. So we are comfortable with that. Right. And just lastly, one question. Could you talk a little bit about customer mix change pre COVID to now, anything on corporate or what sort of customers are traveling today versus earlier? That's it. Thanks. Yes. Anya will take that question. So the peak COVID level, the corporate business and the business traveler, if I may put it, used to be about 50% of the overall traffic. But now for COVID and I think the redemption of the flight, this traffic is still yet to come back to the leisure level. I think as we are expanding and opening up our capacity on a month on month basis and more and more customers are flying and with the experience which we are getting, I think it will matter of time we will start seeing the profits also coming back. And just to kind of put some perspective, we are seeing some traction already happening, especially from the SMEs and individual businessmen coming on board, doing their business, traveling for their business. So that thing is already happening. While it is nowhere comparable to the pre COVID label, but we hope that next few marketing things will start to change there as well. The next question is from the line of Abhinav Bandari from DIPON India Mutual Fund. Please go ahead. Yes. Hi. Thanks for the opportunity. Just continuing on the staff cost once again. There was expected to be a onetime settlement fee, if you can say that, to come in Q2 as well for the 10% of the work force. So is that included in this number of the employee cost for this quarter? Yes, that number, the severance pay that we paid out to the employee is included in this number. So to that extent, next quarter may not have that number. So if you can guide what's the ballpark number for that? So we're not giving a quarterly guidance of this number. What we are saying is that we will be 30% lower than what we committed that we guided earlier from the pre COVID levels. Sure. And the other question was on the other current liabilities, which have fallen sharply in balance sheet. So if you can just guide on what has happened there? Other current liabilities? Yes. You want to come back? From about, I think, INR 2,400 odd crores to INR 17 100 odd crores. Okay. Here's what I said. Aditya is looking at those numbers right now. So let's take the next question and we'll come back and answer. Yes. I think I got the answer. I mean, so a couple of things that happened over here. 1, we were carrying a large credit shell at the beginning of the quarter. That credit shell has come down. Secondly, also, we were carrying forward sales, which were higher at the end of March from where you've seen the comparisons. Those forward sales are lower as well. As you can imagine, the capacity that we're deploying is much lower. So those are the 2 factors driving this 2,415 down to 1758. Got it. Thanks so much and best wishes. Thank you. Thank you. The next question is from the line of Aditya Mounia from Kotak Securities. Please go ahead. Good evening, everyone. Thanks for the opportunity. The question which I had was more on the international aspirations of Indigo and the recent ATMs or slots that IndiGo has won in the London Heathrow Airport. I wanted to get a sense from you that is this a serious step towards starting flight from London to India or more like an experiment at this point of time? So look, our international aspirations are high, they're geared towards narrow bodies and sort of narrow body range. So as soon as the international opens up, we hope to again expand in all directions as fast as we can, but with the narrow bodies. And the wide bodies, we've looked at it many times. And again, until the numbers work for us, we're not going to do it. And I have to say the numbers are looking better now than they did before, primarily because the widebody costs have come down so much. Fuel is down, all that has helped, but it's still not in the green. It's still showing red. So we don't want to do it until the numbers turn green, basically the viewpoint. So it's still a watching But without that, on the nanobody side, we want to expand very quickly as soon as the capacity restrictions are removed. Fair. And just a second question from my side. You talked about a loss number of INR 25 crores on an average basis. Would you be able to provide the loss number as a friend of September or the current number on a daily basis? We guide based on what is in the quarter because there is a lot of seasonality in this number. For example, as we are now getting into the festive season, you will see an improvement in this cash fund. So I think it's good to look at it from an overall quarter perspective. We got INR 50 crores last quarter. We have INR 25 crores on an average this quarter. And we hope as we keep on building capacity and as business starts coming back, this number will keep on decreasing as we go ahead. Sure. I will sit back and take you. Thank you. Thank you. The next question is from the line of Pulkit Patni from Goldman Sachs. Please go ahead. Yes. Thanks a lot for taking my questions. My first question is for Aditya. Aditya just wanted to help this reconciliation. The cash balance that we started March with versus the cash burn that you speak about, INR 30 crores 25 crores. And the INR 18 100 crores monetization that you mentioned you did in this quarter. Based on that, our sense is that probably another INR 3,000 crores worth of monetization is what we could do to achieve that somewhere. Is that the ballpark right, another 3,000 crores worth of monetization that could happen over the next 3 to 6 months? So you are banged on the number. We will be just slightly ahead of INR 3,000 crores of monetization in the next couple of quarters. So that number your number is absolutely right. Okay, okay. Yes, thanks for that. And secondly, just to double check, when we talk about the yield, in case of charter flights, we are also taking into consideration the ASKs for the charter flight, right? That's how we get to do deals. Yes. Okay. Okay. Both of those. Okay. Very helpful. Thank you and good set of numbers. Thank you. The next question is from the line of Mayur Melak from B. O. B. Capital. Please go ahead. Hi. Yes. So, moving the call to number, just wanted to understand the conversion here. So when you said that the AOS rate for the quarter stands here, I believe I'm trying to understand that this is more like a supply, right? So how did the supplier really come off, I mean, from a quarterly perspective? Supply of the ASKs, you're saying? Yes. Yes. The supply of the ASKs is based mostly on the government restriction. So when you started in March, the government said you can everyone, not just Indigo, you can all fly 25% of capacity. So we all did. And then the government said you can now fly 40 I think it was 45, like I mean, capacity, so we bumped up there. Then the government said you can fly 60% capacity, so we bumped up to 58%. And also the government the central government is saying 60%. State governments are sort of restricting us. So as you know, Mumbai, Chennai, Kolkata, they have their own restrictions. So we don't quite reach 60 as a result. So is that the question you're having? Where is the supply? Why is the supply restricted? It's restricted by government restrictions. Yes. And then when this happens, all the other expenses relating to the aircraft, the fixed cost, whether there is maintenance cost or the rental cost, does that also get equaled down to the supply that we are available during the quarter or that really stays for the entire fleet that we have? Well, the leasing costs are fixed. So those are period costs and we incur them irrespective of the capacity. Maintenance costs have got 2 elements of it. 1 is the variable element, which you're right, varies based on how much you fly, which is supplementary rental. But there are fixed elements that are independent of capacity. So you can incur the fixed elements. So that's how our costs are overall made up of. All right. And fuel, of course, I want to believe only to the fuel that you fly, but you will get the entire cost, right? And part of it would have got covered into the the cargo also that you would have typically taken? No. So fuel is variable. Fuel is based on how much capacity we fly. So for example, if we are not flying an aircraft with that capacity, we will not incur the fuel costs associated with it. So therefore, you'll see a fairly sharp drop in our fuel costs even as compared to our capacity deployed is primarily because, a, the rates are lower from last year and we're flying more emission planes than we were doing last year, the Nio ETRA. Fuel is totally variable. Okay. All right. And just last question, did you see the other income also come off? So is there more relation to the kind of cash flow that we had and that is why you see the other income really come off? Look, other income doesn't have any relation because our average cash for the quarter has not been down that much compared to last year. That you're seeing because as you're aware, I mean, our rates have come down fairly dramatically. What we earn on the assets or the investors that we put in the market, I mean, the mutual fund returns are down, 60 plus returns are down. I mean, compared to last year, those yields are down fairly significantly. That's contributing to our interest in coming down. All right. Yes. That is all. Thank you. The next question is from the line of Arvind Sharma from Citi. Please go ahead. Hello. Good evening, sir. Thanks for taking my question. Just wanted to get some more clarity on the non scheduled and scheduled operations. So if you could give a breakup of ASCs and RP case between scheduled and non scheduled that would be the entry? So I think we told you what the international is. That international, we are doing 20% of last September's capacity. And most of that most of the schedule non schedule charter, bundler, bubbles are all international. There are some domestic, but very little. Okay. And in the domestic, there is no non share price. So whatever we see beyond the monthly data that you show is essentially the non scheduled international flights. That's all there. I'd say 95%, that is about 5%, 6% of domestic charters. Sometimes people want to do something to Jaipur for a wedding or something. So there are few of those, but very few. And this number should start seeing since the revenue operations start? Well, we hopefully will grow because more countries are coming into the bubble flight. As I said, Bangladesh just opened. We are hoping Nepal open. So and we are pushing the government to include more and more. So like Kuwait came online a few weeks ago. So we hope that they will grow, but it's not growing in decent bound. It's growing slowly. But it will not be for domestic business. So it will be a very lumpy sort of an operation. Yes, yes, I guess you could say that. But we are hoping that after November, things will open up more aggressively. Thank you so much. That's all for now. Thanks so much. Thank you. The next question is from the line of Aditya Mathkaria from HDFC. Please go ahead. Yes, sir. Just a couple of questions. Our fleet was 2 45 planes last year. They said we're already up to 282. I understand there's going to be rundown on the CEOs and a scale up on the NEOs. But what is the peak paying capacity we would reach from which we would start stabilizing? So for the next couple of years, we'll see a slope drift down. It's not going to be sharp. We'll continue to take delivery of new airplanes. We'll continue to push out the CEOs. So our fleet count will be stagnant and go down a little. But from 2023, we'll be back up again. So I'd say flat to down for a couple of years and then up again. So you're saying in 'twenty two, we would still be up and then 'twenty three will be down? No, no, no. Other way around. In 2022, we'll be down slightly, by 2023, we'll be up again. Okay. They're all fiscal year. Okay. Fair. 2nd, sir, obviously, because of what's happening in terms of the volumes coming down sharply. Are you seeing any players who are withdrawing from the market or any None whatsoever, no. I mean, jet is coming into the market, so there will probably be more players. Okay. So nothing on the competitive intensity easing in that sense? No, not at all. Okay. And just last one housekeeping question. The cargo revenues, what were they this quarter? And how do you account for it? Cargo is a very good story for us. So year over year yes, if you look at this quarter versus last year this quarter, cargo revenues are up 20%, which is a pretty staggering number in my mind given that our capacity was down to 37%. And as you know, we don't even have any freighters. So I think our people, both in operations and cargo, have been very, very innovative in dealing with this whole opportunity. No fraters at all and yet just with cargo in the cabin and so forth, our cargo revenue is up 20%. Not only is it up, the trend is also up. So if I look at the year over year numbers, in July, our cargo revenue was up 9%. In August, our cargo revenue was up 20%. In September, our cargo revenue year over year was up 27%. And I'm like, wow, this is a good trend. And again, hats off to people in cargo division sales, in our operations for making this all work. But cargo has been a very good story for us. So could you just quantify the revenue from cargo this quarter? We don't give a breakup of the cargo revenue. I mean, it's very strong, as we said, when we see the trend continue. Okay, got you. You can see the strength in the ancillary revenue. Most of that is driven by cargo. Okay, got it. Thanks. Thank you. The next question is from the line of Sarfraz Ramani from Motorola Oswar. Please go ahead. Yes, hi. Thank you so much for taking my question. So I wanted to have further understanding on the cash part. So last quarter, we saw that we had a loss of around INR 28 100 crores, whereas our cash fell down by only INR 40 crores. This quarter we had this monetized in line of around INR 18 100 crores. Still we are losing of around INR 500 crores of cash. So any understanding or equation that you can give for this calculation, please? No, I can talk about the current quarter. In current quarter, we started with INR 7,400 crores of cash. I said we burn INR 25 crores a day. So that makes your cash fund about INR 23100 crores for the quarter. And then on top of that, we added INR 800 crores of liquidity that gets us to our INR 6,970 crores of cash. So that's a little bit of the math on the cash. Got it. Got it. And so again, a follow-up on the previous question that was asked by somebody else that we are almost close to around INR 40 to INR 100 crores of liquidity generated in last 6 months and still we have around INR 20, INR 200 crores of liquidity to be generated. So assuming that employee cost stays around current level or as you said that the losses or pay guys can come back, Would this happen only with further, say, sale and use back of the assets that you already own in terms of the claims that we have? Or do we have other avenues also? Those are largely all the liquidity actions that we laid out. I mean, it includes the sale and leaseback of the assets that we own, includes aircraft deliveries that we take, any gain that we make on that. We've had some very fruitful discussions with our vendors and partners. So we've got additional liquidity coming out of it, which is permanent. We also talked about bank giving us a working capital line, which adds another INR 600 crores of liquidity to us. So it's a bunch of different things that bring the liquidity here. And we continue to run down all options from a liquidity perspective. I mean, we're hopeful that we'll add more as we go along the way. I just want to clarify something on the employee cost side. There have been a number of questions about you were down 35% and so forth in this Q and A. As we add capacity back, we should expect our employee cost to go up because we do have leave without pay, and our goal is to remove that leave without pay as quickly possible. And as soon as Akadag, we remove those pay restrictions. So you shouldn't expect that the employee pay costs will stay at these levels. We will keep up. So we do we will stick to our guidance of what we gave right at the beginning, 30% lower employee costs from pre pandemic levels. Yes. Correct. Which is almost closely achieved, I believe. And I also have just one last question to Ronu, sir, that we said we might be around 80% of the capacity by the end of this calendar year or say Q4 of FY 2021. Just to have a ballpark number, when can we expect it to reach 100% domestically, if not internationally, the Q1 of next year? I'm asking in terms of to the challenge that we are seeing in terms of CLF. So what can those be around? Like when metro to metro is coming back, can we see it going back to say 80% odd? So again, the capacity of 80% is very much dependent, first of all, on the government lifting the cap to that level. That hasn't happened yet. We are hoping it happens by the end of the year. If the government is ready, we are ready. Then from 80 to go to 100, again, the same dynamic supply. If the government lifts it, we'll lift it. And what seems to be happening is the government is watching it for 3, 4 months and saying, okay, now lift it. So they go from 25 to 45, watch it, go from 45 to 60, 60, we are hoping 80, I don't know. And then they won't immediately go to 100 the next month, they'll probably wait for 2, 4 months. So if you follow that trajectory, we would hope this is all forecasting, not real confidence that will happen, is that by December, we'll be at 80% and hopefully by April, May of next year, we'll be at 100% if the government in fact allows that. That's domestic only by the way. We're not talking international. Thank you. Mr. Ramani, the question will join the question queue for any follow ups. Thank you. The next question is from the line of Ashish Shah from Centrum Broking. Please go ahead. Yes. Thanks for your question, Devan. Just one question. In terms of the pricing, which is prevailing in the market right now, you think that the floor on the sales, which is imposed by the government, that is keeping the pricing above the floor and once the floor goes away, would you believe that there is a potential for prices to correct further or there is rationality prevailing and that might not happen? Look, we don't operate airline to be in each of our prices. We look at unit revenues. And we feel the less restrictions, the better. We can be creative in different markets in different times. As you know, airline traffic is very, very dynamic and volatile. The demand on Tuesdays is very different from demand on Fridays. The demand in November is very different from demand in February. The demand one way to Rashi is very different from demand out of Rashi. So we are like, hey, how can you fix that? Just leave it up to the different airlines to decide what is right and what is wrong. This any kind of sort of restriction, tariffs, guidelines might work on a certain day of the week, it might work in a certain market, it might work in a certain month. But on a month to month, week to week, day to day, hell no, no one can decide what the freight can't be. So we can just open it up, let the airlines decide. The next question is from the line of Chetan Sheth from Samik Shaikh. Please go ahead. Thanks for the opportunity. Just one clarification on the working capital. You said 50% we have availed, No, the 50% that we have avail has come in over the 6 months from the pandemic. That's from April to September. Okay. And in terms of we are still at INR 25 crores daily average cash flow. At INR80 and our new factors are still at INR55 around 60, INR 65 around. Any given all the cost to control and cost optimization we have been done so far, the past 6 months, What can we have a breakdown, if at all, when we reach 80 or 100 over the next year? So that's a it's a tough question to answer because there are so many factors associated with breakeven. I mean the yields are to continue, competitive behavior has to continue the same way, fuel and FX have to remain where they are. So it's very difficult to give a guidance as to where do you end up being breakeven as such. So there's you have to be very careful to estimate a particular number as to at what level of breakeven. There's just so many variables that play at it, very difficult to call out a number at which you will get to breakeven. But if everything remains the way it is today and nothing really changes, upwards of 85 odd percent or slightly higher, we can achieve greatly. But again, I caution you against the fact that there are too many underlying assumptions to it and even one assumption changing can fairly dramatically change that number. So it's not a number that you should go to the bank. Right. And INR1800 asset monetization doesn't include INR300 crores of working capital, right? INR300 crores of working capital, I didn't understand. I mean, we said INR33 100 crores of overall liquidity over the last 6 months. Yes. So working capital, you have tied around the INR 600 crores, of which 50% has gained, right, over the past 6 months? No. So it's not. Now I got your question now. So the working capital is a line available to us. We've not tapped into it so far. So it's available for us to utilize. It's something that we have signed up only this quarter, in the current quarter. It was effective last year. So it's something that we can tap into if we have a need. So that is why I was getting confused on the cash burn. You explained INR 2300 of cash loss, INR 1800 of asset monetization. I was considering INR 300 crores which you mentioned that 50% were valid. That is where I come from. Now it's clear. Thanks. To clarify, yes, that number is something that we've not tapped into so far. Yes, sure. Okay. Yes, thank you. Thank you. The next question is from the line of Rahul Agarwal from ICICI Prudential Life Insurance. Please go ahead. Yes. Good evening to Neewam. So I just got 2 questions in terms of both in terms of the SLV margins and the lease costs. So we've seen the SLV margin this quarter. And how is it going to trend is what the trend I wanted from you. And also in terms of the lease cost, what kind of lease negotiations are happening on that front given the contribution you're investing in the repayment while we are paying the income fee. So what kind of benefits could come accretive to us in the coming quarters on that We are current on our lease costs and there is no renegotiated renegotiation to reduce the lease costs. In fact, there is no renegotiation that the lessors will entertain. And this is not about Indigo, this is about any other enterprise that they would be dealing with. I mean, these are fairly period in nature and fixed in nature and there will not be any renegotiation on them. These are costs that we keep on holding. Obviously, as new planes come in, they have their own separate economics. But old planes that we acquired at earlier dates, they continue to be at the levels that they were and we continue to honor them and we've not been delaying any of our lease payments. And your first part of the question, I didn't get. If you could repeat that again, please. So just going forward on the lease part, what I'm saying is that given the environment that is currently and the interest cost falls and everything that will happen, but the lease rentals and the lease gains on the let's say, what kind of benefits are we seeing on that side? So the way to think about it is, yes, lease rents have fallen. The rates or the interest rates have fallen. But also remember that the risk perception for an airline typically has gone up. So net net, if you balance both out, I mean, there's not been any dramatic change in the economics of leasing overall. So that's something that you keep in mind. Yes, the headline rates that you see globally were obviously reduced, but risk perception of airlines has also gone up. So our economics remain similar to what they were earlier. Earlier. Okay. So first part of my question was basically in terms of the SMB profit that we generated this quarter. How are those profits going forward? Do we see that to sustain or is that trend, is the falling trend or not suffering on that direction? The trend is stable. It's neither falling, it's neither rising. I mean, we continue to get similar economics we had last quarter and the current quarter. And the market actually is coming back, I won't use the word strongly, but it's coming back well and there are more players who had exited the market are coming back again. So the market is getting more liquid as we speak. And I'll just point out that there's been a lot of disruption on the wide body side. Residual values have fallen and lease rates have come down, etcetera, a lot of volatility and disruption. On the narrow body side and particularly on the Airbus side, it's a relatively stable market. Residual values have not plummeted. These rates have held up reasonably well. So it is a stable market. Thank you. Ladies and gentlemen, that would be the last question for today. I now hand the conference over to Mr. Ankur Goyal for closing comments. Thank you and over to you, sir. Thank you all for joining us. Hope to see you next quarter as well. Thank you very much. Ladies and gentlemen, on behalf of Indigo, that concludes this conference. Thank you all for joining us and you may now disconnect your lines.