Earnings Call: Q3 2019

Jan 23, 2019

Good evening, ladies and gentlemen, and welcome to the Indigo's conference call to discuss the Q3 fiscal year 2019 financial results. My name is Stanford, and I will be your coordinator. At this time, the participants are in listen only mode. A question and answer session will follow today's management discussion. As a reminder, today's conference call is being recorded. I would now like to turn the call over to your moderator, Mr. Ankud Goyal, Associate Vice President of Treasury and Investor Relations for Indigo. Thank you, and over to you, sir. Good evening, everyone, and thank you for joining us for the Q3 fiscal year 2019 earnings call. We have with us our Co Founder and Interim Chief Executive Officer, Rahul Bhatia and our Chief Financial Officer, Rohit Sillett, to take you through our performance for the quarter. Ronanjoy Datta, our Principal Consultant Wolfgang Prakshauw, our Chief Operating Officer and Willie Bolter, our Chief Commercial Officer are also with us available for the question and answer 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 question and answer session will be uploaded subsequently. With this, let me hand over the call to Rahul Bhatia. Good evening, everyone, and thank you for joining us on this call. We announced our Q3 fiscal 2019 financial results today. This quarter, we reported a profit after tax of INR 1,900,000,000 with a profit margin of 2.4%. Though we have seen a reduction in fuel prices during the quarter compared to the previous quarter, on a year over year basis, fuel prices are still 31% higher and the Indian rupee is weaker by 11%. Both these factors have impacted our profitability compared to the same period last year. Our unit revenue was down year over year, but we saw an improvement in revenue performance during the quarter. It was encouraging to see a year on year improvement in RASK in November December on account of improvement in the fares in the 0 to 15 day window. Rohit will talk about this when he takes you through our financial performance in detail. As we have said before, we are focused on building a large and profitable air transportation network in and out of India and are adding capacity in line with our long term growth plan. We added a net of 19 aircraft this quarter and ended the quarter with a total fleet of 208 aircraft. This has enabled us to expand our network both domestically and internationally. Talking about our domestic operations first. We have increased our daily domestic departures by 75 flights per day during the quarter. While some of the metro airports are getting slot constrained, we are encouraged with the growth that we are seeing in Tier 2 and Tier 3 cities. In addition to our focus on our domestic network, we have also strengthened our international presence. We started operations from 6 new international destinations and added 22 international routes during the quarter. Moreover, as part of our international expansion strategy, we have entered into our 1st courtshare and mutual cooperation agreement with Turkish Airlines. This will allow Indigo customers to reach several European destinations beyond Istanbul. Our unit costs, excluding the impact of fuel and foreign exchange, declined on a year on year basis. Moreover, as we add more A320neos and A321neos in our fleet, we expect further unit cost improvements. Maintaining our cost leadership is fundamental to our business, and I'm happy that we remain firmly on track to reduce our unit costs further. We also remain focused on our operational performance. We were ranked as one of the best airlines for the 2nd consecutive year amongst the top 20 mega airlines globally in terms of on time performance based on the data compiled by OHE. Indigo is the only Indian airline to have made it to this list. During the quarter, we had an on time performance of 79.1%, technical dispatch reliability of 99.87% and a flight cancellation rate of 0.45%. Now let me take a step back and recap the year that has gone by. Going into the year, we set ourselves very ambitious growth targets to tap into this very unique opportunity that the Indian market presents. Over the last one year, we have taken delivery of 55 aircraft, roughly 1 aircraft a week. Not many aviation companies globally have the resilience and the organizational strength to grow this rapidly and still continue delivering strong operational performance. We have delivered on all parameters, be it ensuring adequate availability of pilots and cabin crew, growing the network to new markets, strengthening the internal processes and improving efficiencies. I would like to thank all our employees, especially the operational staff for their tremendous performance. In past, we are focused on setting up the right network domestically. Now with this in place, we are looking to strengthen our international presence. We have received our first A320neo, which has a higher seating capacity and lower unit costs compared to the A320neos and also has long range. We plan to start direct flights to Istanbul from March and open other international destinations as the year progresses. Overall, I'm happy with the way we have grown so far and remain very excited with what lies ahead. With this, let me hand over the call to Rohit for a detailed overview of our financials. Thank you. Thank you, Rahul, and good evening, everyone. For the quarter ended December 2018, we reported a profit after tax of INR1.9 billion compared to a profit after tax of INR7.6 1,000,000,000 during the same period last year. We reported an EBITDA of INR 16,800,000,000 with an EBITDA margin of 21.2% compared to an EBITDAR of INR 20,000,000,000 with an EBITDAR margin of 32.4% during the same period last year. As Rahul mentioned, our profitability was lower compared to last year, mainly on account of the increase in fuel price and the depreciation of the Indian rupee. The average aviation fuel price in India during the quarter was 31% higher than the same period last year. After adjusting for the increased volumes, this increase in fuel price resulted in higher fuel costs of INR 7,300,000,000 compared to the same period last year. The Indian rupee closed at INR 69.71 per U. S. Dollar. The average exchange rate for the quarter was INR 72.1 compared to INR 64.8 in the same quarter last year. This had an adverse year over year impact of INR 2,700,000,000 on our dollar denominated expenses. Our total capacity for the December quarter was 21,600,000,000 ASKs, an increase of 32.9% compared to the same period last year. Our revenue from operations in the December quarter was RUB 79,200,000,000, an increase of 28% over the same period last year. Our other income was INR 3,100,000,000 for the quarter. Our RASK for the quarter was INR 3.70 compared to INR 3.82 during the same quarter last year, a decline of 3%. While in October, our RASK showed a similar decline as it has in previous months, we saw a much better RASK performance in November December. This improvement in our RASK performance was largely because of improvement in yields, especially in the 0 to 15 day booking window during these months. For the quarter, our yields were up by INR 3.83, while our load factors were down by 3.2 points at 85.3%. Our CASK for the quarter was INR 3.61 compared to INR 3.16 during the same period last year, an increase of 14.5%. This increase was primarily driven by an increase in fuel prices and currency depreciation. The currency depreciation also impacted our CASK excluding fuel. And as a result, our CASK excluding fuel was INR 2.04 in the current quarter, an increase of 6.3% from the same period last year. Excluding the impact of foreign exchange, our CASK excluding fuel reduced by 0.4%. We remain relentlessly focused on maintaining our cost advantage and have taken steps to create efficiencies and further improve productivity across the organization. Our balance sheet continues to be strong. Our cash balance at the end of the period was INR 141,400,000,000 comprised of INR46,200,000,000 of free cash and INR95,200,000,000 of restricted cash. Before I close my remarks, let me give you our capacity guidance for the coming quarter. We expect the year over year capacity increase in terms of ASKs of 34% for the 4th quarter. With this, let me hand it back to Ankur. Thank you, Rahul and Rohit. 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 if needed. And with that, we are ready for the Q and A. Thank you very much, sir. Ladies and gentlemen, we will now begin the question and answer session. The first question is from the line of Anshooman Dev from ICICI Securities. Please go ahead. Hi. Thanks for the opportunity. Regarding the good improvement in RASK that we have seen, so this quarter, did we have any PNM Pratt and Whitney compensation? And if not, then could you give a brief color on the delta that we saw between October November December? Because if we see sequential, the sequential fares have increased by almost 23%. So there's a very strong pattern that we have seen in government December. Some color on that would be useful. Yes, sure. Let me answer the first question on credits. There's no year over year improvement on account of credits. So it's all related to passenger revenue. I'll let Willy comment on the trend in the quarter. Sure. Well, as Roy pointed out, I mean, October was another month in which the pricing in the market was very, very competitive. But then as we ran into Diwali and into the peak season in November December, the pricing environment improved quite markedly. And the key improvement was in that 0 to 15 day booking period, where as opposed to the previous quarter we reported on and there was a very large reduction in yields. In this quarter, the yields, looking at the year on year picture stayed stable. And as a result, the RASK number was a lot better. So I hope that, that gives you the sufficient color. Yes. Thank you. And one last question was regarding our search for the CEO. Any update on that because post the retirement of Mr. Greg Taylor, do we have any update on that? We hope to have an update fairly soon. So Okay. Thank you. Thank you. The next question is from the line of Ronnal Dalal from Ambit Capital. Please go ahead. Yes. Hi. So my question was, ancillary revenue has grown by around 15%. What would you say is the breakup of this ancillary revenue? 2nd is interest in depreciation costs are much higher on a year on year basis. Any reason for the same? And usually, you used to give capacity guidance of the coming year and maybe 1 or 2 quarters. This time, it's only 1 quarter. Anything on that? Thanks. So let me answer a few things and then turn it over to Willy, Hadid. Interest and depreciation was primarily due to 2 factors. We've taken a number of KTRs that we've acquired through cash purchases as we've talked about in the prior quarter. So the asset base has increased. So one component is that. And the second component is related to the owned aircraft on our balance sheet have over the last year have gone through several engine shop visits where those engine shop visits are capitalized and has increased run rate of depreciation this year, which you'll see. And there's also a currency impact on that as well. So that's depreciation. On interest, the currency impact is the issue. In terms of capacity guidance, we will we normally give capacity guidance for the fiscal year or in the last quarter of the year. So we'll give you guidance for the next fiscal year on the next quarter's call. And so we'll update you then. In terms of ancillary, I'll just comment on the breakup of ancillary, it's about 30% cargo and 70% passenger. The weakness and why it's not grown in line with capacity is mainly on the cargo side and maybe Willy, you want to comment on anything else. Yes. And there's a few things to say about ancillary. I think we, in this call, 6 months ago, indicated that we were going to be putting more emphasis on selling ancillaries. And there are, apart from the cargo side, there are a number of categories of ancillary. Obviously, there are cancellation charges, there's advertising, there's onboard sales, there's various products to help the passengers journey through the airport, etcetera. And it's gratifying that we are getting some improvement in that ancillary revenue. I would say though that we are very mindful that by global standards, we are still below what would be an average for a low cost carrier, and we continue to focus on that. Turning to cargo, it's a wider issue. I mean, I think cargo, I mean, we are delighted that we've managed to improve our market share. It was about 24% in April. It's now in the sort of 27%, 28% region. But we again, as indicated, I think, on this call 6 months ago, we again are putting a lot of effort behind cargo and we hope that, that share will move closer to our passenger share. Thank you. Sure. And hello? Yes, please go ahead. Yes, yes, yes. And one last thing is that the dollar denominated deposits, we had mentioned that last time it was around 1 third of the supplementary lease rentals. Any update on the sale? Yes. We've continued to increase the number of dollar denominated leases for now. We're about 80% of our supplementary rent is supplementary rent liability is collateralized with dollar deposits. So the exposure to the rupee on the mark to market on this, it used to be in the order of INR 1 is equal to INR 85 crores. Currently, it's from INR 1 is equal to INR 24 crores. And we'll, by the end of next quarter, I think, pretty much be fully hedged. Sure. Okay. Thank you. All the rest. Thank you. The next question is from the line of Archil Kumar from HSBC. Please go ahead. Yes, hi. I've got a few questions. One about the capacity growth. As Rahul mentioned, a lot of capacity is coming on the Tier 2 and Tier 3 cities. According to OAG data, you are getting significant capacity growth on the new routes. For example, the Kanur, I mean, these days, a lot of news about the canoe, I mean, you're signing a lot of new flight. So how do you see this will impact the yield? I mean, it looks like quite dangerous. I mean, a lot of capacity is coming in the new routes. So that is one thing. Secondly, I want to understand about the recent news on your stalled I mean, you had a plan to start Europe, but now the news says that you have stalled the plan. Previously, Mr. Rakesh Ghanwal talked about a lot talked a lot about this saying that these operations are good. So now what has changed? As in is there any change in the strategic directions? Or what has changed? Last thing I want to understand about the November number, you said the 0 to 15 days window, the fare has strengthened. Or is there any change in your strategic approach from rather than looking at the load factor to now, are you considering more on the yields? Thanks. Okay. So this is Ronan Datta, and I'll take the question on the international first. So we are going to grow international very aggressively. Our international growth will for this year, coming quarter, for example, 30% of the growth will be international. And to the specific question of are we have we given up on going to Europe or to London? The answer is no. It's very much alive, and we are looking at it, and we'll take a decision soon. So it's at this point, it's neither yes nor no. Your other question was what's happening in the 2nd tier markets. And really, it's quite encouraging that although we are growing so rapidly that we don't see a negative impact on our unit revenue. Most other companies like Southwest or EP Jet, when they talk about the earnings, they say, Here's what's happening to our new markets, which are developing markets, and there we've taken a unit revenue hit. But on the rest of the market, we're doing fine. We don't see any such distinction. And it's quite encouraging to see all these new cities that we are going into. They have responded so well. So we don't see any sort of weakness in RASM as a result of new markets. Was there a 4th question there? About load factor and yield, which I'm happy to talk about. I mean, I think as we discussed last time, the revenue per available sea kilometer is a balance of load factor and yield. And it's a competition that never goes away in a sense as one looks forward and looks at forecasting and so on. Revenue management is about a mix of load factor and yield and that's the way it will be. I mean, I think some of our competitors concentrate perhaps rather too much on the load factor part of it, but I'll leave it at that for now. Okay. I mean, Mr. Batai, you talked about the European and U. S. Market, and I'm sure European market is slightly different. So in terms of India, when we about India and you know that in India market, when we talk about the new sector and new routes, the gestation business, I think, much longer than what it is there in Europe. So don't you think that will have a sort of impact on the yield and probably you'll have to wait for the longer term to sort of increase the fares? So that is one thing. Of course, and now especially when everybody is growing, I mean, the next year, it was into the 2019, I mean, if you see the Vistara is growing, of course, leaving Jet Apart. I mean, GoAir is growing, Pfizer is growing. So if everybody is growing, don't you think that could actually raise the competition? Okay. So when you said that European and U. S. Markets are different, it's true that in Europe and U. S, typically, they talk of a 6 month gestation period. What is surprising looking at the Indian market is there is no such thing domestically as a gestation period of 6 months. We've grown a lot of new flights, as you can see from our schedule, and they're all doing surprisingly well. So I don't see that as an issue at all. Anshul, if we can request you to go back into the queue and give others a chance to ask questions. The next question is from the line of Ashish Shah from Goldman Sachs. Please go ahead. Thank you, sir, for the opportunity. As I look through the data, what we see is that we have added 2 ATRs this quarter, but our ownfinance lease has not gone up at a time in 29. So are we now financing are we now also doing operating lease on ATS? We have yes, Ashish, we have done 2 operating leases on ATRs. On the last two ATRs, we have taken the first 12 ATRs on as cash purchases. We I think as I've mentioned on prior calls, during the periods of uncertainty, airlines it's always prudent for airlines to manage cash carefully. So we decided to finance the next tranche of 5 airplanes through operating lease. And then we'll make a case by case basis beyond that. So these 2 as well as the next 3 ATRs we're going to take on operating lease. Okay. So there's no change in strategy. This is just a temporary measure where we just to preserve the cash we are taking for it on a finance operating lease? That is correct. Okay. And sir, if you could give some more color on the yields there. How do you think these yields are sustainable and how do you see the environment going forward? I think all I'd say on this for the time being is that the better environment that we had in November December has continued so far. And we see that there is some discipline in imposing advanced purchase requirements. And that I think as we described again last time is the critical issue when we look at the development of yield in the Indian market. Okay. Thanks a lot. Thank you. Thank you. The next question is from the line of Vijayan Gupta from Edelweiss. Please go ahead. Yes. Hi, sir. Congrats on a great set of numbers. Excuse me, this is the operator. Mr. Gupta, may we request you to use the handset please? Your voice is not clearly audible. Congrats on a great set of numbers. I have a couple of questions. Firstly, on yields. So given the slowdown which we have seen over the past couple of months where growth has slowed down to around 12% for the industry and a number of players are expanding capacity at around 30%, Do you think that yields would be sustainable at these levels? Is it possible that we may see a cutback in capacity in the future in order to maintain yields? And secondly, on the significant increase in cash balance. So we have seen a net cash accretion of around INR 13 100 crores versus cash profit of roughly INR 400 crores. So presumably, there is an increase in there's a decrease in working capital. Can you please elaborate on this breakup as well? So if I can talk about the capacity issue. So by and large, when countries growing at that and ex GDP, I'm sure you're all familiar with the notion that air traffic grows at a displace at rate. So right now, the industry is growing at about 19%. If the underlying economy is growing at close to 8%, 7.7%, I think, is the exact number, It would say, yes, the industry should go at that rate. And our specific capacity, if you look at last year and this year in 2 years in unison, we've been a little lumpy in the sense that in 2018, we didn't grow enough. Our domestic capacity grew by only 10%, while Spice was at 21%, go was at 27%, jet was at 11%. So we grew slower than everyone else. Now this year, we're playing catch up. So yes, we are growing faster. But even then, our domestic capacity is growing at only 25%. The industry is growing at 19%. So these would all be major issues if the underlying economy was not growing. But when you have a close to 8% growth in the economy, you would say, yes, the industry should be growing at least double that rate. So I don't see that as much of an issue. And again, I would stress the fact that our future capacity, a lot of it is going to go international. So overall, yes, we are quite happy with the capacity decisions. So for 2019, can we expect capacity growth at 30% for domestic or would it significantly slow down? So I think we'll come and give you some more precise guidance for the next quarter. But what we've said previously is we expect about 25% a year over the last 3 years. And so it might be a little bit higher than that, but we'll give you a more precise guidance next time. The Shrey, maybe turn to your question on cash. The cash balance increased on the restricted cash and on the free cash side. On the free cash side, it was about INR 250 crores increase and the rest was in restricted cash. Yes, there was obviously, that's more the increase was bigger than the profits. So we do get some incentives when we take delivery of aircraft and that helps with the cash balance. Some of that gets deposited in restricted cash to securitize lease obligations. But net net, that's what drives the increase in cash balance. So that lease incentive, does it also show up in other income? Or is it entirely on the balance sheet? So I think our the way our I think you can follow-up with Ankur to understand this in more detail, but our accounting policy basically has the lease incentive gets amortized over the life of the lease. So and on the P and L side, you recognize it over 6 years, while on a cash flow basis, you get it upfront. We can explain it to you in more detail offline, if you'd like. Okay, got it. Okay. Thanks a lot. Yes, that's it. Thank you. The next question is from the line of Rohan Advind from MultiAct. Please go ahead. Yes, thanks for the opportunity. My first question was on the growth in engine rentals, which is 46% on a Y o Y basis. That is much higher than the ASK growth and the depreciation of the currency. So do NIOs have higher rentals versus the CEOs and that is why it's much higher? So I think there's obviously the currency depreciation plays a part in that. And then there are some credits that offset lease rentals that appeared last year as well as this year. And when you net all that out, that's why you see the percentage is a little higher than the growth in capacity and the currency depreciation. Okay. But the NEOs, would they have higher rentals than the CEOs? On a net basis, there's differences in CEOs and neos, especially when you talk about older planes, you'll have lower lease rentals, especially the used planes that we have, have lower lease rentals, but higher maintenance costs, higher fuel burn. Neos might have slightly higher rentals, but lower maintenance costs and lower fuel burn. So you can't really compare it unless you're comparing it apples to apples. Okay. And lastly, on the lease period for the new neos that we are getting, is that also for 6 years? Or are we doing a higher lease period? Currently, we're doing them on 6 years leasebacks. Okay. Thanks for taking my questions. Thank you. The next question is from the line of Chokalangam Narayanan from BNP Mutual Fund. Please go ahead. Yes. Hi. Thanks for the opportunity. First is on the new engine issues, where are we as far as what's the update from patent Whitney? And when can we kind of see these issues kind of getting normalizing? Yes. Wolfgang here. So as you know, initially, we had certain issues with the new engine. Most of the technical issues have been resolved. Modification programs are in place or are in have been already modified or are in progress with a short vision to be implemented within a short period of time. And just recently, 1 month ago, there was a meeting of the Indian regulator, TCZA, with the operators in India on new aircraft, and there was also a contact with FAA. FAA has confirmed that all the engines are well within the limits prescribed by this regulator and also by DGCA. Just to give you an example, the in flight shutdown rate is per FAA, the U. S. Regulator, 0.05 by 1,000 engine flight hours. We operate at 0.02. So we are well within the norms set out by FAA. And as per FA, no need for further measures to be implemented. However, DGCA was asking us for some more regular checks, which we are doing anyhow, we did on our own. And so for us, the situation is completely under control. Some nearly all one aircraft is AOG right now, but otherwise all aircraft are flying. And we don't see any restrictions on the engine side for further expansion going forward. But just on a few incidents in between in the media, so I just think smoke and other issues and also about possibly the regulator asking us not to fly on the Andaman Group. Basically, we want a large stage length long stage length routes. So in that sense, will it be a constraint as far as flying international on the new flights, both A320 and A321? Yes. So on this Port Blair, that's correct. The regulators asked us not to operate to Port Blair. But that's more that's not out of flight safety reasons, it's more of logistical reasons. If something happens to transport an engine, therefore engine change is more complicated. That's why we are not flying to Port Blair. With respect to international expansion, we don't see any restrictions because most of our routes for we want to expand are normal operations. So you have to have a diversion airport within 60 minutes of your flight path. And so we don't see any restriction on that side. And on top of that, we have about 40 CO aircraft, which are Etops aircraft that we use mostly from South India to the Gulf Air. You will fly a larger proportion of your journey over water. So combined with this 40 ETOPS, ETOPS means extended range operations and with our A320s, A321neos, which can which will fly the routes with a 60 minutes diversion there, but we don't see any restrictions coming up in our extension. That's very useful. Secondly, on capacity constraints at the key airports, what's the thought process? And how do you see your ability to kind of grow market share out of these key routes? Yes. I mean, naturally, A321 is a universal aircraft, which can be used for longer flights, can fly up to 6 hours or more than 6 hours and will also be used to into capacity constraints, constrained airports. So for example, you have destinations where you have 15, 16 frequencies a day. So if you use a couple of A321s on these rotations, then you can free up slots, you can expand to other destinations. So it's for us a very useful universal aircraft, which we can use for international expansion and also domestic expansion capacity constrained airports and bringing our seat miles cost down because of the larger capacity. So we are very happy to have this aircraft coming in. But how much would the fuel burn kind of increase if you deploy this on shorter stage length, say like a Delhi Bombay, if you kind of operate, will the fuel burn actually increase if you deploy A321 on this? Yes. It all comes down to the cost of operating a seat. And definitely, with this kind of aircraft, we will have something like 10% lower seat mile cost approximately. So our cost of bringing 1 seat from, the daily to Mumbai will be 10% lower. And just as a reference point, we asked Airbus that where are people using them on short haul high frequency routes. And as I recall from memory, they gave us the numbers for both Air France and Lufthansa who have a lot of Air C-twenty 1. And average stage length was for less than 2 hours of flying. So they are used on short haul, high frequency routes all over the world. And your point was that, gee, you won't have enough slots in Delhi and Bombay. Well, having 2 22 seats per aircraft is a huge advantage in those markets. That's very useful. That was just to better understand that aspect on the fuel burn. Thanks a lot and very good set of numbers. Thank you. Thank you. Thank you. The next question is from the line of Kunal Lathan from AXIS Capital. Please go ahead. Yes. Hi, good evening. Just to follow-up on the previous question, how should we look at the fleet mix going ahead with the infusion of T21 now, going ahead like incrementally the number of fleets that we'll add, how should we look at the mix in terms of I mean, I understand like there is a 150 plane order of A321. Just over next couple of years, if you can give some color on how the fleet addition via A321 will be that will be helpful. Yes. So as you know, we have an aircraft order of 430 neos, out of which we have the ability to sort of with adequate notice ask Airbus to deliver any one of the A320 family, which includes A319s, A320s, A321s. We don't intend to take any A319s at this point, but we will take a number of A321s going forward. So we expect to take actually a large number of next year's deliveries with A321s. And then we'll continue to sort of assess that and make those decisions on an ongoing basis. But the mix will definitely increase upwards in terms of increasing the mix of A321s. Yes. And just another follow-up on that would be that the deployment strategy for these fleets would be on the trunk routes, right? I mean, you're not looking at deploying these on the sort of non trunk routes. That is roughly correct, yes. So, HC21, their first primary mission will tend to be international. And then to some extent, they'll be domestic. And you're right, we'll obviously put them into high demand, stock constrained routes. So we stick you into the trunk route, yes. That's helpful. Secondly, on the yield front, you mentioned that November, December saw some improvement in the 10 to 15 day 0 to 15 day window. How are we seeing that in Jan so far? Sorry, it's also for the quarter. In January. Well, I think as I mentioned earlier, the trends that we saw in November December continue within the market and we're obviously content with that. All right. All right. Thanks a lot and all the best. Thank you. The next question is from the line of Suraj Chaddha from IIFL. Please go ahead. Hi, this is Joseph from IIFL. My first question is in relation to the comment on yields. Now there's a lot of excitement in the investor community today because of the 20 odd percent Q2 jump in yields. But what I want to check is how much of this is seasonality because obviously 3Q is seasonally far stronger than 2Q. And how much of it is actually an underlying improvement in demand? That's the first part of the question. 2nd part is when you talk about Jan being as good as November December, are you implying that high yields that is prevalent in the seasonally strong November December period has continued into Jan? Or are you saying that on a year on year basis, the improvement that you saw in November December, that same rate of year on year improvement is starting to do into Jan? I think that, yes, we are saying that the there is still some improvement. I mean, I'm sort of straying into commercially sensitive areas here. So I don't want to say too much on this. But Rohit, I think Let me just set some context here. Firstly, I think on a quarter on quarter basis, it's always very difficult to sort of explain the numbers because of the seasonality. So that's why we look at it on a year on year basis. So on a year on year basis, I think as we talked about, yields were up 4% or 3.7% for the quarter. That included a yield decline in October with yield improvements in November December on a year on year basis. So compared to seasonally strong quarter a year ago, we saw improvements in November December yields. And again on January year on year, January is again getting into a slow quarter, but we are talking about it all on a year on year basis. And so that's usually the comp. Willy, do you want to add anything? No, I think that's fine. As I say, I mean, traditionally, we don't really comment on performance going forward too much. Yes. I mean, I think that's what we tried to add the color of what we've seen so far in January, those trends, which is really driven by the fact that the fares in the 0 to 15 day window remained strong. And that's what we had not seen the last couple of quarters. If I were to make a macro level statement, I would describe our situation as follows. We are growing rapidly. We're growing into new markets. And despite all that, our unit revenue picture is firm, which I think is a surprising situation to be in, frankly. So but that's how I would describe our overall situation. Got it. Thank you. The second question that I had was you mentioned that you have moved the about 80% of the deposits corresponding to the restricted cash into USD deposits. Would it be right for me to assume that the investment income that we are this is purely for the purpose of modeling, investment income that we are modeling in future periods, the yield on the overall cash balance should come down. I mean, it's quite logical, but just want to confirm. Yes. Got it. And so the last question that I had was, while we while you talked about the improvement in the 0 to 15 day window, what we have also noticed is that there is a fall in load factors. So to some extent, it can be said that the improvement in yield, the 3.7%, 3.8% YOY improvement in yield has come at the cost of volumes. And if that is the case, how do you really measure the improvement in underlying pricing if the yield just come at the cost of volumes? Well, I could say that the part of the reduction in load factor is because of our very fast growth and growing at 30%. It's certainly a tall order to keep the same load factors in the previous year. But having said that, I think that the yield picture is a relatively bright one. And I don't have any particular concerns, as I say, moving forward. I think just to again address your question more directly, you're talking about again 3.7% improvement in yield for the full quarter and a 3.2% decline in load factors roughly offsets each other. But for the quarter, our RASP performance was roughly flat. It included this sort of phenomenon of October, which was very negative and an improvement in November December. And in November December, the improvement in yield is much, much more significant than the loss and load factor. So it's definitely the right trade off from our perspective. Perfect. Got it. Thank you. Thank you. The next question is from the line of Sanjay Doshi from Reliance Mutual Fund. Please go ahead. Good evening, sir, and thanks for the opportunity. Sir, I just wanted your comments on the overseas strategy. You mentioned earlier in the call that the greater opportunity opportunity to service a larger market. I just want your thoughts about the kind of competition and the behavior of this competition in the international market? And how does that business stack up versus your key domestic routes and the Tier 2, Tier 3 cities in terms of profitability? Yes. So we have a huge advantage in going international in that we are going with single aisle planes. Now that also restricts us to within 6 hours of flying. So you can draw a map around all our principalities and say, where are these guys going to fly? Where are we going to fly in that 6 hour radius, if you will, from each of the principal cities? Now when we're flying in those, we have a single aisle at a low cost, and we are clearly not trying to get the business class traffic, which we don't have a business class. But in those markets that we are going to fly with a single aisle low cost strategy, we have a huge cost advantage. So we are very excited about our growth opportunities internationally. And just to give you another metrics, if you will. Right now, we carry 6% of the international traffic in and out of India. Foreign carriers carry 61%. So we have a huge opportunity for growth. And when we say, Oh, we are growing rapidly, yes, but we've not grown internationally at all for decades. And now we're just trying to claw back, which we believe it rightfully are. So we are very excited about international. We have the right airplane. We have the right cost structure, and we think we'll make strong headway internationally. If I may add here, I mean, we are the only carrier having a huge domestic network behind our international expansion. So we can connect something like 40 to 50 domestic destinations to our international market, which gives us a unique advantage over the other foreign carriers, but also smaller Indian carriers. So we want to connect the huge domestic network with a very fast growing international network, and we have also started preparations in that context, reducing minimum connecting times to make a hassle free journey from the hinterland of India into the our international destinations. Understood. Just on that second part of the question, how is the competition behaving differently, if at all, in the international business today and what is there in the domestic? And in terms of profitability, if you can just rank the 3 key businesses that we can segregate, overseas, domestic key routes and the Tier 2, Tier 3 domestic? Okay. So I think it's phases of growth, right? Our first phase and as you logically expect would be in the metro to metro. So we've grown that. The market has matured. We'll grow it somewhat slowly. As we said, we go from 320 to 3 'twenty one. We have more seats for departure, so we'll continue that book. What has been exciting is the Tier 2 cities. And didn't expect that much growth and that much response to our added capacity. And after Hyderabad, we do the 6 metro. Then you have a range of cities. I just mentioned places like Ahmedabad, Pune, Nagpur, Lucknow, Guwahati. I mean, these are all Tier 2 cities, which are like, wow, I didn't realize there was so much traffic in those cities. So that's great. And then the 3rd area of growth now will be international. And how will the competition behave? Well, all these hubs, they rely on their feed from other places. And if you do city to city strategy, clearly, they would win. But as Wolfgang said, they had their feed into, I'll pick Singapore or Dubai or any of these places. They have the feed at the other end. But now for the first time, we have feed into our major gateway cities. So we have Indian feed into Delhi and Mumbai and Chennai and all of these cities. And yes, we can fight off Singapore and Dubai quite forcefully, I believe, with our feed. So I think your overall question was where do you see it growing? Well, we saw the 1st phase over with the front to trunk routes. The 2nd phase is in play right now, the 2nd tier cities, and they're responding very well. And now the 3rd phase will be international expansion. Many thanks, sir, and all the very best. Thank you. Thank you. Thank you. The next question is from the line of Pulkit Singhal from Motilal Oswal Asset Management. Please go ahead. Hi, thanks for taking my question. So when I look at the last 5 years, I mean, your ASK growth has largely been in the 18%, 20% range barring FY 2017, where it was 27%, and which incorporated 1 odd quarter of 30% kind of growth. Now in each of those years, yield, the load factors had gone up, which to me is demand outstripping supply at that price point. Now going I mean this year and going ahead, your ASK growth is at a higher trajectory and you are a much larger the market share in the market. So and this is the first time I've seen that load factors are coming down. So is there to say is it to say that you may not get that like the demand growth may be slower than the kind of capacity addition that you're doing at the price point right now? Because this is quite different from what we've seen in previous 5 years. So let's take a longer term perspective. And this is all predicated on the fact that the Indian economy remains strong. If it doesn't, we have a different But there's nothing that says the Indian economy won't continue to be one of the fastest growing economies in the world. Now the second factor that comes into play is what they call the propensity to travel. So what is the number of people for given the GDP, what should we expect? Well, developed countries are like 10x higher than us in terms of the propensity to travel. So you have two factors working for you. Let's say, 7.5% growth rate and a low propensity to travel will get higher and higher as people have no income. With both of those combined, there's no reason to expect that aviation traffic shouldn't grow at between 18% to 22%. And I'm now including international and domestic. And yes, domestic, we've got a good share. Internationally, we have a minuscule share. As I said, 6% of the international is what we share right now. Why can't we grow that to 25%? I'm just picking a number. So if we have domestic capacity, our market share is 43%. If you want to go to 25% of the international traffic, just imagine the number of airplanes we need. So we need a lot more planes, frankly. And what's happening also is we're getting new technology planes, which is why we're going so fast because the new technology planes are lower unit cost. Now our older planes will tend to mature and grow out of the system, and therefore, we need more planes. So yes, if anything, there's a desire to buy more planes, grow faster because we see lots of opportunities all around us. Right. So basically, you're saying that the domestic market can absorb 18% to 20% kind of increase in capacity, but then the rest will flow into the international, and that's why your growth rate is higher between 25% to 30%. Absolutely. I mean, as we grow like even this year, 70% of the growth has gone domestic, 30% growing internationally. And you'll continue to see that as we go forward. And do you think the 18% to 20 percent kind of growth in domestic will require fair stimulation? Or I mean, I'm taking out the competition aspects completely, but in your view, does that require fair stimulation? Or it can be at flattish yields as well? We are looking at revenue growth of 18%. Now you can come in load factors, it can come in yields. But this twice 2.5 times the GDP growth is looking at revenue. And airlines can choose to take it in any mix they think is appropriate. Got it. Thank you and all And again, don't I think you should look at China and what happened to their aviation traffic as they grew. I mean it was like breathtakingly fast and sustained for a long period of time. I think we are just entering that phase. Well, I completely agree. I mean we have around $3,750,000,000 I mean, the propensity of travel is already there when we just see the number of rail tickets sold in the country. It's just that, I mean, as you're getting into the newer Tier 2, Tier 3 cities, hopefully, that will help get a lot of those people on board. I beg to differ in that the propensity to travel in India is still among the lowest in the world. I mean, we are far behind Brazil or any other developing market and way behind Europe or the U. S. Okay. From an air travel perspective, I presume you're referring to. Are you what? Air travel. I presume you're referring to air travel. I was referring to overall travel in the country. Absolutely. Absolutely. Okay. Got it. Thank you and all the best. Thanks, Pulkit. Thank you. The next question is from the line of Anshooman Deeb from ICICI Securities. I had one question regarding the perspective that some of the competition as well as government point of view that we already have domestic market share of 43%. So we understand that we are doing a lot of international and there we can have a lot of unbilled growth. But just to put a number in domestic market share, is there any regulation or is there any limit to which IndiGo can grow after which there would be some kind of a government intervention or some rules which can play out, especially in the domestic market? Well, this is Rahul. To the best of our understanding, there is no limit. And I think Indigo is always very cautious about sort of its market share. And consequently, we try to behave very responsibly. We don't want ever to be seen as an airline, which is either gouging the customer or the competition. We're just trying to be an efficient company trying to connect the country from all corners, and we'll continue to do so. And really, I think IndiGo should be given a lot of credit and appreciation for the kind of infrastructure building that we are doing. The government is putting a lot of emphasis on building growth, which is great. They want to build river traffic. They want to build ports. They want to revamp the railways. Thank God, they don't have to worry about the airline side of it because we are taking care of building great infrastructure. And we are not only doing it in an elitist sort of way that only a few people can travel. We're doing it for the affordable fares for the mass. And you look at how we've connected Guwahati to Shanghai and Jaipur to Amritsar and all these cities, And it's the fantastic infrastructure that we built, which is great for the nation. So I don't know why anyone would object to this and say, no, no, no, you're growing too fast. We're growing too fast. We're building great infrastructure for the country, which sort of builds on the economic prosperity of 7.5% growth that we're talking about. Without this sort of air traffic infrastructure, that growth would slow down. So I mean, I don't see why the government should be concerned. And most importantly, we're doing it in a self sustaining way. Everyone wants to build the infrastructure, but they can't think of a way of doing it profitably. We are demonstrating that we can. Great. That's very helpful. And one last question was regarding to Mr. CFO. If we can give some more color on the accounting of credits that we are doing right now in terms of compensation from PNW and whether we can expect some more of Pranghuti compensation in the coming quarter in the sense that I want to understand that because of some groundings, we would have expected some conversations already, but it's not been there. So if any possible, I don't I know you don't share the quantum of the same, but in case you can give some color on the accounting and the trend of that. Yes, sure. Obviously, it's something that is competitively sensitive and contractually sort of specific details as you can appreciate. But directionally, I think we've talked about this before. We get we do get some credits from the manufacturers to offset the effect of aircraft groundings and delivery delays. Some of those credits get are offsetting sort of lost revenue or higher expenses that get recorded in the revenue line or the expense line as appropriate. If you looked at last year, we had in the similar period, we had a larger number of aircraft groundings and so the quantum of that compensation, you can imagine, was higher than it was in this current quarter. So that's pretty much the color that we've shared previously, and we can share and that's what we can share right now. Okay. Thank you. Thank you. Ladies and gentlemen, we'll take the last question from the line of Ashish Shah from Goldman Sachs. Please go ahead. Ashish Shah from Goldman Sachs, your line is unmuted. Please go ahead with your question. Please unmute the line from your side. Ladies and gentlemen, that was the last question. I now hand the conference over to Mr. Ankur Goyal for closing comments. Thank you all for joining us on this call. I hope you found this useful. Thank you very much, sir. Ladies and gentlemen, with that, we conclude today's conference call. Thank you for joining us, and you may now disconnect your lines. Thank you.