Good evening, ladies and gentlemen, and welcome to IndiGo's conference call to discuss the Q2 of fiscal 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 Goel, Head of Investor Relations for IndiGo. Thank you, and over to you, sir.
Good evening, everyone. 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, Ronojoy Dutta, and our Chief Financial Officer, Aditya Pande, to take you through our performance for the quarter. Wolfgang Prock-Schauer, our Chief Operating Officer, and Sanjay Kumar, our Chief Strategy and Revenue Officer, are also with us and are available for the Q&A session. Before we begin, please note that today's discussion may contain certain statements on our business or financials which may be considered 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. 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&A session will be uploaded subsequently. With this, let me hand over the call to Rono Dutta.
Good evening, everyone. Thank you for joining us on this call. I trust all is well at your end. We reported a net loss of INR 11.9 billion in the September quarter, compared to a net loss of INR 10.6 billion 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 touchpoints, from the initial reservations to bag 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 stand-alone 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 fronts. Once we 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 artfully fashioned a new network that observes all the capacity restrictions and yet maximizes revenue. Simultaneously, we've been able to transform ourselves from purely scheduled carrier to one also adding charter operations, and 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 Clean 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-19 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. As a result, we are carrying higher number of passengers at around 58% of domestic passengers in September versus 48% in January.
I am 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 an all-time high. It is heartening to know that employees feel inspired and motivated even during these difficult times. Our low levels of aircraft utilization 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 our 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%.
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 ₹69.7 billion, 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. 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. With that, let me hand over the call to Aditya to discuss the financial performance in further detail.
Thank you, Rono, and good evening, everyone. For the quarter ended September 2020, we reported a net loss of ₹11.9 billion compared to a loss after tax of ₹10.6 billion on a year-over-year basis. We reported an EBITDA of ₹4.1 billion compared to an EBITDA of ₹2.6 billion during the same period last year. During the quarter, we operated at 36.7% of our year-over-year capacity, which 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 best summarized by 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% to ₹3.83. However, our RASK reduced by 5.4% to ₹3.24, primarily driven by reduction in our load factors by 18.5 points. Our passenger and cargo charters continue to perform well, adding to our overall revenue performance. Our fuel cost decreased by 43.4% compared to 32.2% 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 ₹69.7 billion, reduction of ₹5.6 million as compared to free cash at 30th June 2020.
As we have added more capacity, our net cash burn per day reduced from INR 300 million per day in June 2020 to an average of INR 250 million per day in the quarter. We have spoken about various liquidity initiatives totaling to INR 60 billion 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 INR 6 billion. This sanction also demonstrates the faith lenders have in our balance sheet and resilience of the company. Of the INR 66 billion 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 ₹40 billion, we are currently looking at all debt options before we take any decisions 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 rental and maintenance costs. This cost comprises two major components. First is the 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 cost 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 ₹229.3 billion and total debt, including the capitalized operating lease liability of ₹254.2 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, Rono and Aditya. To answer as many questions as possible, I would like to request that each participant limit themselves to one question and one brief follow-up question if needed.
With that, we are ready for the Q&A.
Thank you very much. Ladies and gentlemen, we will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touchtone telephone. If you wish to remove yourself from the question queue you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Sonal Gupta from UBS. Please go ahead.
Yeah. Hi. Good evening. Thanks for taking my question. Just wanted to understand, one, what I was trying to understand is what is the clarity there is now on the international operations because when you're guiding for 60% utilization of fleet, and last year almost 25% of fleet was deployed on international. You're sort of implying if there was no international, that almost 80% of domestic would be sort of back. Just wanted to get what is the sort of clarity on the international side. How do you see that ramping up?
Let me answer the question more broadly on overall capacity, because I'm sure there'll be other follow-up questions on this. First, let's talk of domestic, and then I'll also go into international. Domestic at this point, as you said, last quarter we ended September with about 47%. Today as we speak, we are close to 60%, slightly short of 60%. 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'll happen, but we are encouraged by the discussions that are going on. Our best guess is domestically we'll be at 80% capacity by the end of the year, early next year. Let me talk about international specifically. We have been doing international in various ways through, as you know, Vande Bharat flights, charters, and bubble flights.
How much exactly are we doing? Well, September-over-September, if you look at all international flights, we are about at 20% of last September. Last September to this September that's where we are. Demand continues to increase. More bubble flights. Bangladesh is opening up and so forth. We know there'll be no scheduled service till the end of November at least. How quickly it will progress, we don't know. To answer your question, right now we are at about 20% internationally, and then we'll have to wait and see. Domestically, we are 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 Broking. Please go ahead.
Yeah. 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 INR 1,300 crores of lease rental payments which are reflected. How much of the rentals will be deferred here and not reflected in the cash flow?
As we said, even during the last quarter, we have not deferred any lease payments. We are current on all our lease payments, and we continue to honor them as per the schedule. We were current in 1Q, and we continue to be current in the second quarter as well. There is no pendency on the lease payments as such.
Sure. Right. I'll come back in with you. Thank you.
Thank you. The next question is from the line of Lokesh Garg from Credit Suisse. Please go ahead.
Hi, sir. I wanted to ask you a question on fleet plan. We have seen fleet has continued to grow while obviously the utilization, as you said, remains in the 37% range. Should we expect a large bunched fleet, sort of lease plane returns at the end of the year? There are planes coming up currently also, which is both neo and 321 neos. Is there any update that you can share in terms of renegotiation with Airbus on any delivery delays or any delivery timeline renegotiations?
We always had a plan to return the classic ceo aircraft, and we are still on track on that. We are returning them as fast as we can, but according to our old plan. Between our operations team and maintenance and aircraft finance have done a great job despite the disruptions that you have seen worldwide. A lot of planes have been placed with miles across the world in terms of returning these airplanes. We are on track on that, and those numbers are quite large, 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 one, we want to accelerate one, but largely we are on track.
Our fleet plan is very stable. It hasn't changed much, and we are proceeding according to our plans.
Sure. Basically between, let's say June to September, there is only six CEO planes that seems to have reduced. If the plan is to do 30, 40 each year, then lot of them would go towards December, is it?
Christian, you want to take that question?
Basically you are on the right track, so to say, because 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 the lease returns getting momentum. We can balance whatever comes in. We balance somehow with lease returns. That's our strategy with this fast return cycle, that we keep our fleet younger, by the way, that is made, and stabilize the fleet, as Rono has mentioned.
Sure. I'll get back in the queue for more questions.
Thank you. The next question is from the line of Deepika Mundra from JPMorgan. Please go ahead.
Hi, good evening, and thanks for the opportunity. Before we, ASK guidance, I remember last you all mentioned 50%-70%.
Deepika, the audio is breaking. May I request you use a handset or come in network area, please?
Hi, I'm audible now?
Yes, slightly better.
Oh, okay.
Still the audio is breaking.
Okay. I am just going to be very short. On the ASK guidance, you mentioned 50% to 70% last-
No, no. Still not clear. I'm sorry to interrupt. May I please request you to redial in again, please?
Okay, sure. Bye.
Thank you. The next question is from the line of Vipul Garg from Kotak. Please go ahead.
Hello. Sir, thanks for the opportunity. The question is that how's the cash position? At present, this quarter, we had a loss of about INR 1,100 crores, out of which INR 500 crores was boosted by the Forex gains. Effectively, loss of INR 1,600 crores, if we leave aside the Forex part. The cash portion has not decreased by that much amount. Whether any monetization of assets, et cetera, have taken place? There's a second question regarding the supplementary rentals. Though the flights have improved vis-à-vis Q1, supplementary rental amount is same. Is any renegotiation or some deferment has taken place on the supplementary rental part?
I'll take this. You're right. 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. We have infused some liquidity out of that, including selling some of our assets, as we had called out earlier. That's where you see the delta between the losses and the net cash burn. Our cash is down from INR 7,400 to INR 6,900. Net cash burn for us is INR 500 crores for the quarter. That's your answer to your first question. 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. Since we put more capacity, supplementary rentals driven by capacity have obviously increased.
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. There has been an increase, largely driven by capacity. Last quarter, this number was INR 739 crores. This has gone up to INR 842 crores in the current quarter.
Sir, earlier I think there was some deferment of the supplementary rentals. Still that deferment is continuing?
The way to think about deferment of supplementary rental is that we neither owe them as well. How the process works is that we have to put up an LC upfront at the beginning of the year, and that reconciles at the end of the year based on the usage of the aircraft. The fact that we are not deploying capacity anyway because of the situation, we have worked with the lessors to make sure that we don't put up those LCs as well. Effectively, we are neither putting them up nor are we paying. It's not as if there will be a catch-up of this after six months or nine months.
Okay. Sir, how much monetization was done during this quarter?
We did an overall monetization of INR 1,800 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.
Hi. Thank you for taking this question. First of all, on the cash, just taking the last question forward. I can see that the owned aircraft has reduced from 39 to 22. Does that mean you have done the sale and leaseback of all the unencumbered aircraft and you don't have any more aircraft to do sale and leaseback?
No, we've got seven 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 four ATRs and three CEO planes that we own.
That's what you're showing INR 1,000 crore in your cash flow statement, right?
Correct.
Okay. Second thing, I also want to understand the PDP burden. Now what is the status with your CFM engine and what kind of PDP burden you see due to the CFM and due to your new aircraft coming in? Is there any change in the PDP burden because the leasing market is changing? What kind of PDP burden you are expecting?
There is no incremental PDP burden on us. This is as per our contract that we've negotiated with Airbus, and we continue down the same path. It's neither gone up, nor has it come down. We continue with the same PDP payments that are as per our contract and plan with Airbus.
Even with the CFM?
Yes, this is with Airbus. These payments are through Airbus. CFM is an engine provider to Airbus. 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. 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 that question since he worked his magic. What do you do, Sanjay?
Look, yields are better compared to last year, same quarter. I would contribute this to be basically the traditional demand. If you remember in the Q1 of the year, we had people moving out metro to non-metros and other cities. Now what we saw in the Q2 was traffic returning back to the metro. That was one reason we saw a huge demand in those markets, non-metros to metro. Then also there was a limitation on the capacity side. There is still some constraint as far as some markets are concerned, like Kolkata and Mumbai, which are still constrained due to the local state regulations. That is also because of lack of capacity in those markets, we are seeing better yield.
Overall, it is the combination of lesser capacity, increased demand in the marketplace, which has kind of helped us in terms of yield improvement.
I would add to that, the charter yields have also been very good. 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 yield improvement. I think our commercial team between planning and sales and revenue management have done a great job in picking all the right destinations and schedules.
Right. I have last questions, but I'll come in the queue. Thank you.
Thank you. The next question is from the line of Deepika Mundra from JPMorgan. Please go ahead.
Hi. Thanks. I hope you can hear me now. Just a couple of questions from my side. Firstly, on the ASK, I think last quarter you had mentioned 60%-70% in the December quarter it should be operational. Now you're mentioning 60. Are your expectations slightly lower for the festive period? Secondly, on the yield, last two quarters have been very strong. As more of your capacity becomes operational, do you see this advantage dissipating? Thanks.
Okay. Just let's clarify the capacity issue. We are close to 60% right now as we speak today. We're not at 60, we are around 58. We're not saying 60% by the end of the year. 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. If the government does, 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 be at 80. As to the yields, 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.
When we open new capacity, we say, let it book for three months before we actually start flying. That's obviously not happening today. If the government says add 80, we'll go to 80 within 10 days, which means 10 days of booking. Obviously it starts off somewhat soft, but then it picks up very quickly. That's why we're saying we are stair-stepping our way to higher revenue 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 and frequencies. They don't book immediately, obviously. There's a lag for two weeks, but then it picks up nicely. That's what we are seeing. 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 two, three weeks. That's why we're quite positive on it.
Okay. Thank you.
Look, 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 get better quickly. The good news is, given this last four, five months experience, all those really bad scenarios are off the table. Yeah, things won't get great quickly, but things are definitely not as bad as we might have feared back in March. All that gives us room for some optimism.
Okay. Thank you.
Thank you. The next question is from the line of Binay Singh from Morgan Stanley. Please go ahead.
Hi, team. Thanks for the opportunity. Apologies if in case this question has already been answered. What will be your aggregate cash burn for Q2 per month? Like in Q1, we were saying it was around INR 120 million.
Our average cash burn for the quarter is INR 25 crores a day. December was INR 30 crores a day at the end of last quarter.
Okay. 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, that does reflect the staff cuts as well.
It actually captures three things, the staff cuts, the pay cuts, and the leave without pay. All those three things are coming into it.
Right. It's a combination of all the three.
In a way, this number will not fall further. It should largely remain around this level.
Yeah, it will not change too much. As capacity comes back, the leave without pay may settle back a little bit. There'll be some differences around that. We're sticking to our real guidance of this being 30% lower than the pre-COVID levels. We are comfortable with that.
Right. 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. Sanjay will take that question.
The pre-COVID level, the corporate business and the business traveler, if I may put it, used to be about 50% of the overall traffic. Now post-COVID and since the resumption of the flight, this traffic is still yet to come back to the original 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 with the experience which they are getting, I think it's a matter of time we will start seeing the corporates also coming back. Just to 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. That thing is already happening.
While it is nowhere comparable to the pre-COVID level, but we hope that next few months, things will start to change there as well.
Great. Thank you so much.
Thank you. The next question is from the line of Abhinav Bhandari from Nippon India Mutual Fund. Please go ahead.
Yeah. Hi, thanks for the opportunity. Just continuing on the staff cost once again. There was expected to be a one-time settlement fee, if you can say that, to come in Q2 as well for the 10% of the workforce. 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.
To that extent, next quarter may not have that number. If you can guide what's the ballpark number for that?
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. The other question was on the other current liabilities which have fallen sharply in balance sheet. If you can just guide on what has happened there.
Other current liabilities?
Yeah.
You want to come back to me?
From about, I think, INR 2,400 odd crores to INR 1,700 odd crores.
Okay. Here's what I said. Aditya is looking at those numbers right now. Let's take the next question, and we'll come back and answer.
Yeah. I think I got the answer. A couple of things have happened over here. One, 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're seeing the comparison. Those forward sales are lower as well. As you can imagine, our capacity that we deployed is much lower. Those are the two factors driving this INR 2,415 down to INR 1,758.
Got it. Thanks much, and best wishes.
Thank you.
Thank you. The next question is from the line of Aditya Mongia 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. Wanted to get a sense from you that, is this a serious step toward starting flights from London to India, or more like an experiment at this point of time?
Look, our international aspirations are high, but they're geared towards narrow-bodies and sort of narrow-body range. 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. 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. I have to say the numbers are looking better now than they did before, primarily because the wide-body 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. We don't want to do it till the numbers turn green, basically, is our viewpoint. It's still a watch and wait.
Without that, on the narrow body side, we want to expand very quickly as soon as the capacity restrictions are removed.
Fair. 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 kind of set number or the current number day to day?
We guide based on what is in the quarter because there is a lot of seasonality in this number. For example, as we now getting into the festive season, we will see an improvement in this cash burn. I think it is good to look at it from an overall quarter perspective. It was INR 30 crores last quarter. We are INR 25 crores on an average this quarter. 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 wait here. Thank you.
Thank you. The next question is from the line of Pulkit Patni from Goldman Sachs. Please go ahead.
Yeah. 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 crore and INR 25 crore, and the INR 1,800 crore monetization that you mentioned you did in this quarter. Based on that, our sense is that probably another INR 3,000 crore worth of monetization is what we could do to achieve that number. Is that ballpark right? Another INR 3,000 crore worth of monetization that could happen over the next three to six months?
You are bang on the number. We will be just slightly ahead of INR 3,000 crores of monetization in the next couple of quarters. Your number is absolutely right.
Okay. Yeah, thanks for that. Secondly, just to double-check, when we talk about yields, in case of charter flights, we are also taking into consideration the ASKs for the charter flights, right? That's how we get to these yields.
Yeah. Yes.
Okay. Very helpful. Thank you, and good set of numbers.
Thank you. The next question is from the line of Mayur Milak from BOB Capital. Please go ahead.
Hi. Yeah, regarding the numbers, just wanted to understand that a bit here. When you said that the ASK for the quarter stands here, I'm trying to understand that this is more like a supply, right? How did the supply really come off, from a quarterly perspective?
Supply of the ASKs, you're saying?
Yes.
Yeah. The supply of the ASKs is based mostly on the government restriction. When we started in March, the government said, everyone, not just IndiGo, you can all fly 25% of capacity. We all did. The government said, you can now fly 40, I think it was 45% capacity. We bumped up there. The government said, you can fly 60% capacity, so we bumped up to 58. Although the central government is saying 60, the state governments are sort of restricting us. As you know, Mumbai, Chennai, Kolkata, they have their own restrictions. We don't quite reach 60 as a result. Is that the question you're having? Where is the supply? Why is the supply restricted? It's restricted by government restrictions.
Yeah. Then when this happens, all the other expenses relating to the aircraft, the fixed cost, whether there's some maintenance cost or the rental cost, does that also get scaled down to the supply that is available during the quarter or that really stays for the entire fleet that we have?
The leasing costs are fixed, so those are period costs, and we incur them irrespective of the capacity. Maintenance costs have got two elements of it. One is the variable element, which you're right, varies based on how much you fly, which is supplemental rental. There are fixed elements that are independent of capacity. You have to incur the fixed elements. That's how our costs are overall made up of.
All right. Fuel, of course, I'd want to believe only to the tune that you fly, but you incur the entire cost, right? Part of it would have got covered into the cargos also that you would have typically taken.
No. Fuel is variable. Fuel is based on how much capacity we fly. For example, if we are not flying an aircraft with that capacity, we will not incur the fuel costs associated with it.
Okay.
Therefore, you'll see a fairly sharp drop in our fuel costs, even as compared to our capacity deployed. That's primarily because, A, the rates are lower from last year, and we're flying more efficient planes than we were doing last year, the neo aircraft. Fuel is totally variable.
Okay. All right. Just last question. We've seen the other income also come up. Is that more a relation to the kind of cash flow that you had, and that is why you're seeing the other income really come up?
No. 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, our rates have come down fairly dramatically. What we earn on the assets or the investments that we put in the market. I mean, the mutual fund returns are down, fixed returns are down. Compared to last year, those yields are down fairly significantly. That's contributing to our interest in coming down.
All right. Yeah. Thank you.
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. If you could give a breakup of ASKs and RPKs between scheduled and non-scheduled, that would be really great.
I think we told you what the international is. That international, we are doing 20% of last September's capacity. Most of the non-scheduled, charters, Vande Bharat, bubbles, are all international. There's some domestic, but very little.
Okay. In the domestic, there is no non-scheduled flights. Whatever we see beyond the monthly data that you show is essentially the non-scheduled international flights. That's all there is.
I'd say 95%. There's about 5, 6% of domestic charters. Sometimes people want to do something to Jaipur for a wedding or something. There are a few of those, but very few.
This number should sustain till the regular 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 opens. We are pushing the government to include more and more. Like Kuwait came online a few weeks ago. We hope that it will grow, but it's not growing in leaps and bounds. It's growing slowly.
It will not be on a monthly basis, so it will be a very lumpy sort of an operation.
Yeah. I guess you could say that. We are hoping that after November, things will open up more aggressively.
Thank you so much, sir. That's all from my side. Thanks so much.
Thank you. The next question is from the line of Aditya Makharia from HDFC. Please go ahead.
Yes, sir. Just a couple of questions. Our fleet was 245 planes last year. This year, we are already up to 282. I understand there's going to be a rundown on the ceos and a scale-up on the NEOs. What is the peak plane capacity we would reach from which we would start stabilizing?
Look, for the next couple of years, we'll see a slope dip 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. Our fleet count will stagnate and go down a little, but from 2023, we'll be back up again. I'd say flat to down for a couple of years, and then up again.
You're saying in 2022, we would still be up?
No.
2023, we'll be down?
No, other way around. In 2022, we'll be down slightly. By 2023, we'll be up again.
Okay.
We're all still there.
Okay. Fair. Second, 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?
None whatsoever, no. Jet is coming into the market, so there'll probably be more players.
Okay. Nothing on the competitive intensity easing in that sense?
No, not at all.
Okay. Just last one, housekeeping question. The cargo revenues, what were they this quarter, and how do you account for it?
Look, cargo is a very good story for us. Year-over-year, 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%. As you know, we don't even have any freighters. I think our people, both in operations and cargo, have been very innovative in dealing with this whole opportunity. No freighters at all, 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. 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%.
I'm like, "Wow, this is a good trend." Again, hats off to our people in cargo division sales, in our operations for making this all work. Cargo has been a very good story for us.
Sure, sir. Could you just quantify the revenue from cargo this quarter?
We don't give a breakup of the cargo revenue. It's very strong, as we said, when we see the trend continuing.
Okay, got you.
You can see the strength in ancillary revenue. Most of that is driven by cargo.
Okay, got you. Thanks.
Thank you. The next question is from the line of Sarfraz Vemanani from Motilal Oswal. Please go ahead.
Yeah, hi. Thank you so much for taking my question. I wanted to have further understanding on the cash part. Last quarter, we saw that we had a loss of around INR 2,000 crores, whereas our cash was down by only INR 40 crores. This quarter, we had this monetization run of around INR 1,800 crores. Still we are losing around INR 500 crores of cash. Any understanding or equation that you can give for this calculation, please?
No, I can talk about the current quarter. In the current quarter, we started with INR 7,400 crores of cash.
Correct.
I said we burn INR 25 crores a day. That makes your cash burn about INR 2,300 crores for the quarter. On top of that, we added INR 1,800 crores of liquidity. That gets us to our INR 6,970 crores of cash. That's a little bit of the math on the cash.
Got it. Again, a follow-up on the previous question that was asked by somebody else, that we are almost close to around INR 3,000-3,300 crore of liquidity generated in last six months, and still we have around INR 2,000 crore of liquidity to be generated. Assuming that employee cost stays around current level, as you said that the loss without pay guys can come back, will this happen only with further, say, sale and lease back of the assets that you already own in terms of the planes that we have, or do we have other avenues also?
Those are largely all the liquidity actions that we laid out. It includes the sale and leaseback of the assets that we own. It includes the aircraft deliveries that we take, any gain that we make on that. We've had some very fruitful discussions with our vendors and partners. We've got additional liquidity coming out of it, which is permanent. We also talked about a bank giving us a working capital line, which adds another INR 600 crore of liquidity to us. It's a bunch of different things that brings the liquidity here. We continue to run down all options from a liquidity perspective. 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 Q3 again. As we add capacity back, you should expect our employee cost to go up because we do have leave without pay, and our goal is to remove the leave without pay as quickly as possible. As soon as our capacity goes up, we remove those pay restrictions. You shouldn't expect that the employee pay costs will stay at these levels. They will creep up.
We do stick to our guidance of what we gave right at the beginning, 30% lower employee cost from pre-pandemic levels.
Yes. Correct. Which is almost closely achieved, I believe. I also have just one last question with you, Rono, 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? Asking in terms of the challenge that we are seeing in terms of PLFs. What can those be around? When metro to metro is coming back, can we see it going back to, say, 80% odd?
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. From 80 to go to 100, again, the same dynamic supply. If the government lifts it, we lift it. What seems to be happening is the government is watching it for three, four months and saying, "Okay, now lift it." They go from 25 to 45, watch it, go from 45 to 60. 60, we are hoping 80, I don't know. They won't immediately go to 100 the next month. They'll probably wait for three, four months.
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. Damani, the questioner joined 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.
Yeah, thanks for your question today again. Just one question. In terms of the pricing which is prevailing in the market right now, you think that the floor on the fares, which is imposed by the government, that is keeping the pricing above the floor and once the floor goes away, do you believe that there is a potential for prices to correct further? There is rationality prevailing and that might not happen?
Look, we don't operate our airline to elites or prices. We look at unit revenues. We feel the less restrictions, the better. We can be creative in different markets and 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 Ranchi is very different from demand out of Ranchi. We are like, "Hey, how can you fix fares?" Just leave it up to the different airlines to decide what is right and what is wrong. Any kind of restriction caps, guidelines might work on a certain day of the week. It might work in a certain market. It might work in a certain month. On a month to month, week to week, day to day, hell no.
No one can decide what the fare capping. We think just open it up, let the airlines decide.
Sure. Fine. Thank you.
Thank you. The next question is from the line of Chintan Sheth from Sameeksha Capital. Please go ahead.
Thanks for the opportunity. Just one clarification on the working capital. You said 50% we have availed, that has came in Q2 or in the month of October?
No, the 50% that we have availed has come in over the six months from the pandemic. That's from April to September.
Okay. We are still at 25 crore daily average cash burn at 80 and our load factors are still at 65 around. Given all the cost to control and cost optimization we have done so far the past six months, what can be our breakeven, if at all, when we reach at 80 or 100 over the next year?
It's a tough question to answer because there's so many factors associated with breakeven. The yields have to continue, competitive behavior has to continue the same way. Fuel and FX have to remain where they are. It's very difficult to give a guidance as to where do you end up being breakeven as such. You have to be very careful to estimate a particular number as to at what level of breakeven. There are just so many variables at play at it. It's very difficult to call out a number at which you will get to breakeven. If everything remains the way it is today and nothing really changes upwards of 85% odd or slightly higher, we can achieve breakeven.
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. It's not a number that you should go to the bank with.
Right. INR 1,800 asset monetization doesn't include the INR 300 crore of working capital, right?
300 crore of working capital, I didn't understand. We said INR 3,300 crore of overall liquidity over the last six months.
Yeah. Working capital, you have tied around INR 600 crore, of which 50% has came, right? Over the past six months.
No. It's not. I got your question now.
Yeah.
The working capital is a line available to us. We've not tapped into it so far. 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 quarter. It's something that we can tap into if we have a need.
That is where I was getting confused on the cash burn. Where you explained INR 2,300 crore of cash flow, INR 1,800 crore of asset monetization. I was considering INR 300 crores, which you mentioned that 50% was earning. That is where I am confused. Now it is clear. Thanks.
To clarify, that number is something that is not tapped into so far.
Yeah. Sure. Okay. Thank you.
Thank you. The next question is on the line of Rahul Aggarwal from ICICI Prudential Life Insurance. Please go ahead.
Good evening to everyone. I just got two questions, both in terms of the SLB margin and the lease cost. We've seen the SLB margin this quarter, and how is it going to trend is what the point I wanted from you. In terms of the lease cost, what kind of renegotiations are happening on that front? Given the competition is deferring their lease payments while we are paying very promptly. What kind of benefits could come, according to you, in the coming quarter on that front? That's it from me. Thank you.
We are current on our lease cost. There is no renegotiation to reduce the lease cost. In fact, there is no renegotiation that the lessors will entertain. This is not about IndiGo, this is about any other enterprise that they would be dealing with. These are fairly period in nature and fixed in nature. 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. Old planes that we acquired at earlier dates, they continue to be at the level that they were. We continue to honor them, and we've not been delaying any of our lease payments. Your first part of a question I didn't get. If you could repeat that again, please.
Just carrying 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 has happened, the lease rentals on the new planes, from the let's say, what kind of benefits are we seeing on that front?
The way to think about it is, yes, lease rents have fallen. The interest rates have fallen. Also remember that the risk perception for an airline typically has gone up. Net, if you balance both out, there's not been any dramatic change in the economics of leasing overall. That's something that you must keep in mind. Yes, the headline rates that you see globally have obviously reduced, but risk perception of airlines has also gone up. Our economics remain similar to what they were earlier.
The first part of my question was basically in terms of SLB profits that we generated this quarter. How are those profits going forward? Do we see that to sustain or is there a falling trend or an upward trend on that direction?
The trend is stable. It's neither falling, it's neither rising. We continue to get similar economics we had last quarter and the current quarter. The market actually is coming back. I won't use the word strongly, but it's coming back relevant, and there are more players who had exited the market are coming back again. The market is getting more liquid as we speak.
I just point out that there's been a lot of disruption on the wide-body side. Residual values have fallen, lease rates have come down, et cetera. 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. Lease rates have held up reasonably well. It is a stable market.
That's very helpful. Thanks a lot.
Thank you. Ladies and gentlemen, that will be the last question for today. I now hand the conference over to Mr. Ankur Goel 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.