Earnings Call: Q2 2019

Oct 24, 2018

Evening, ladies and gentlemen, and welcome to Indigro's conference call to discuss the Q2 fiscal year 2019 financial results. My name is Aman, and I'll be your coordinator. At this time, the participants are in a 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. Ankur 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 Q2 fiscal year 2019 earnings call. We have with us our Co Founder and Interim CEO, Gaurav Bhatia and our Chief Financial Officer, Rohit Saleb, to take you through our performance for the quarter. Greg Taylor, our Senior Advisor Wolfgang Prokshawar, our Chief Operating Officer and Riri Bolter, our Chief Commercial Officer are also with us and 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 Raul Bhatia. Good evening, everyone, and thank you for joining us on this call. We announced our Q2 fiscal 2019 financial results today. The Q2 is seasonally the weakest quarter of the year. In addition, as you are aware, there has been a surge in the fuel prices and a significant depreciation in the Indian rupee during the quarter. Fuel constitutes over 40% of our total costs and about 50% of our costs excluding fuel, are denominated in foreign currency. Typically in the airline industry, you would expect to see higher fares to cover the increased costs. However, that has not happened here. This has significantly impacted our profitability, and we reported a net loss of INR 6,500,000,000 for the quarter. Rohit will talk more about this when he takes you through our financial performance in detail. Despite these pressures on the industry, we continue to execute our long term growth plan focused on building a leading nationwide air transportation network. India remains a significantly underpenetrated market with all the Indian carriers combined having about 600 commercial planes flying between themselves. In comparison, some of the largest carriers in the U. S, Europe and China would alone have more planes than this. There continues to be strong growth in the demand for air travel in India, and we are scaling up to offer more choices to customers and satisfy this demand. Along our journey to build this robust network, we added 20 aircraft to our fleet and ended the quarter with a fleet of 189 aircraft. This enabled us to add 5 new destinations and 35 new routes, including 3 routes under the ODARM scheme. We have also selectively increased frequencies across our existing network and now offer connectivity to over 1300 city pairs via non stop and one stop flights. We have crossed the milestone of operating over 100 daily departures out of each metro city, Delhi, Bombay, Bengaluru, Calcutta, Hyderabad and Chennai. We have begun selling tickets for 7 new destinations, including 6 international cities: Alawad, Abu Dhabi, Hong Kong, Kuala Lumpur, Kuwait, Male and Phuket. In addition, we expect to start receiving Airbus A321neos from November this year, which will bring some more international points within range. Besides growing rapidly, we continue to perform well operationally. We had an average OTP of 86.8% for the quarter and were awarded the best airline on on time performance at the 3rd edition of ICONIC Awards. Our technical dispatch reliability was 99.87% for the quarter. I am also happy to report that our company was awarded the best domestic budget airline at the Zee Business Travel Awards 2018. None of this would have been possible without the efforts of over 2,200,000 Indivo team members who work relentlessly with the single-minded focus of making us a world class ally. Another testimony is the recent award for companies with great managers at the Great Managers' Awards 2018 presented to us by People Business. Finally, let me say that all of us at IndiGo were deeply saddened by the extensive flooding in Kerala, and I was heartened by the rapid response of the airline. Before services to Kochi airport were restored, we operated a total of 92 additional flights out of Kozhikode and Thiruvanthanam and 24 flights from the Kochi naval base to facilitate the increased travel needs into and out of Kerala. We provided special assistance to our passengers through free of charge cost cancellations and rerouting for affected customers and aided rescue operations by transporting over 50 tons of relief supplies from our various collection centers across India. Once again, Indigo provided practical and immediate help during the testing times for our country. With this, let me hand over the call to Rohit for a detailed overview of our financials. Thank you, Rahul, and good evening, everyone. For the quarter ended September 2018, we reported a net loss of INR 6,500,000,000 compared to a profit after tax of INR 5,500,000,000 during same period last year. We reported an EBITDAR of INR2.2 billion with an EBITDAR margin of 3.6% compared to an EBITDA of INR 16,000,000,000 with an EBITDA margin of 29.9% during the same period last year. As Raul mentioned, our profitability was significantly impacted by cost pressures from the increase in fuel prices and the depreciation of the Indian rupee as well as from the competitive fare environment. The average aviation fuel price in India during the quarter was 40% higher than the same period last year. Fuel is about 40% of our costs. After adjusting for the increased volumes, this increase in fuel price resulted in higher fuel costs of INR 9,100,000,000 compared to the same period last year. The Indian rupee also depreciated significantly during the quarter and closed at INR 72 point 5.8 per U. S. Dollar. Based on this, we booked a foreign exchange loss of INR 3,400,000,000 compared to a loss of INR 500,000,000 during the same period last year. The currency depreciation also had an adverse year over year impact of INR 1,400,000,000 on our dollar denominated expenses. So the overall impact of currency depreciation increased our costs by INR 4,300,000,000 compared to the same period last year. Unfortunately, these higher input costs have not been recovered as fares remain low due to continued intense competition. Similar to the last quarter, the 0 to 15 day booking window remains weak with lower fares compared to the same period last year. This has been further accentuated by the significant increase in capacity in the market. We are getting significantly more aircraft as Airbus has ramped up its new deliveries to make up for the delays earlier. In this growth phase, when new capacity is being added, the RASK is generally lower as it takes time for new markets to mature. The year over year impact of lower RASK on our profits is INR 5,600,000,000. The total capacity for the September quarter was 19,500,000,000 ASKs, an increase of 28.9 percent compared to the same period last year. Our revenue from operations in the September quarter was INR 61,900,000,000, an increase of 16.9 percent over the same period last year. Our other income was INR 3,300,000,000 for the quarter. Our RASK for the quarter was INR 3.23 compared to INR 3.52 during the same quarter last year, a decline of 8.1%. This decline in RASP was primarily driven by a decrease in yields. Our yields were down by 9.7% to INR 3.21, while our load factors were nearly flat at 84.5%. The year over year fuel price increase of 40% led to an overall CASK increase of 24.1%. Our CASK for the quarter was INR 3.74 compared to INR 3.01 during the same period last year. CASK excluding fuel was INR 2.18 in the current quarter, an increase of 13.5 percent from the same period last year, primarily because of the adverse effect of foreign exchange. The foreign exchange loss combined with the impact of currency depreciation on our dollar denominated expenses resulted in an 11.2% increase in our CASK excluding fuel. Excluding the impact of foreign exchange, our CASK excluding fuel went up by only 2.3% despite inflationary pressures. We have taken several steps to create efficiencies and improve productivity as we scale up. For example, we have adopted various initiatives to reduce the fuel burn on our planes by reducing weight and improving navigation and landing procedures. We have also improved the productivity of airport operations through better cross utilization of resources. We have refined our maintenance schedule to provide to improve aircraft utilization by carrying out activities during the night. Our balance sheet continues to remain strong. Our cash balance at the end of the period was INR 132,000,000,000 comprised of INR 44,000,000,000 of free cash and INR 87,000,000,000 of restricted cash. We purchased 3 ATRs using our free cash during the quarter. We had total debt of INR 26,000,000,000 at the end of the quarter. Before I close my remarks, let me give you our capacity guidance for the coming quarter. We expect a year over year capacity increase in terms of ASKs of 35 percent for the Q3. For the full year, we expect a capacity increase of 30%. This is higher than our previous guidance because, as I mentioned earlier, we have now started seeing a ramp up in NIO deliveries post the initial delays. 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 required. And with that, we are ready for the Q and A. Thank you very much. Ladies and gentlemen, we will now begin the question and answer session. The first question is from the line of Ronal Dhalal from Hamid Capital. Please go ahead. Mr. Dalal, your line is unmuted for questions. You may please go ahead. Hi, good evening. So my question is about the regional connectivity scheme. So I was wondering that so first and foremost, how much percentage of your overall ASK would be deployed currently and maybe in this year be deployed in the RCS scheme? So this is Greg Taylor. I'll take that question. I don't have an exact percentage for you, but it's very small at the moment. I mean, we are participating in the scheme, but it's only a handful of routes with ATRs. We have other bids and we'll be adding more flying in RCS markets as we go forward. But as of right now, I don't It's not material. It's not material. It's not material, okay. Because I was just checking out the load factors are significantly lower for Indigo versus some of the competitors on the same routes? Again, my second question is that in the long and medium haul operations, any like advancement in the plans for going into international markets besides the I mean, is there any kind of cutback from what was the earlier plan? So this is Greg Taylor again. Sort of long haul flying with wide body airplanes at this point is kind of remains more of an aspiration than a plan. But in the interim, we continue to add a lot of international markets that are within range of A320 family airplanes. And later this year in November, we'll be getting deliveries of A321s that have additional range and that's going to open up some other markets for international flying. So we continue to our plan is to take advantage of international opportunities within the capabilities of our existing fleet in the near term. Right, right. And last question is that hello? Yes. Yes, yes. So my last question is that so you had also mentioned on the call that the capacity additions are high for the industry. But mostly the capacity additions are high because they're driven by Indigo right now. So from April to October, you all have added around 33 planes, whereas the other participants have not really added so many planes. So mostly the capacity addition is high because you all have the highest market share and you're all adding planes at a very high pace. So is that the reason why the fares are low rather than just competition? Let me take the capacity addition question and then Greg can sort of talk comment on the fares. The capacity addition, what we said was that because of the delays in the new deliveries that we were scheduled to get earlier, they started ramping up. And so we got sort of a bunch of deliveries more bunched up than the sort of the original schedule. And so yes, we did get a number of deliveries this quarter. But Craig, you want to take the question on Well, the only thing I would add to the capacity answers question is if you look back over previous quarters, I think what you would tend to find is that industry capacity domestic industry capacity grows around this kind of 19%, 18%, 20% range. In some periods of time back when the neos weren't being delivered, Indigo was making up a smaller percentage. Now we're making up a larger percentage, but the industry overall continues to grow at this 20% range, which is kind of in line with demand. So you're right. This quarter, we grew faster, but competitors grew slower. If you look back a couple of more quarters, it was somewhat reversed. So that's the situation right now. With regard to the fares, I'll turn that over to Willy, if he'd like to take that one off. Sure. It's Willy Bolte here. I mean, we are, as we've mentioned, in a period of intense competitive pressure. And I want to characterize that by really looking at the booking periods. If you look at the booking period outside 15 days, what we've seen is that whereas previously 60% of our traffic was booked in that period, Now that's reduced to around 54%. And the reverse is obviously applied to the booking period within 15 days, where it's increased from 40% previously in previous year to 46% now. And what we've seen is that the competitive pressure is very intense in that period. And we've seen the yields decline closer to departure. Whereas if you actually look at the yields beyond 15 days, so bookings outside that 15 day period, the yield has actually gone up. So I think with that in mind, that explains why the fares, I mean, we have to match what we see happening in the market. Obviously, we are keen to protect our market share. And as a result, we have to match the activity of the other carriers. Okay, sure. I'll get back in the queue. Thank you. Thank you. The next question is from the line of Vinay Singh from Morgan Stanley. Please go ahead. Hi, Pheema. Thanks for the opportunity. Just on the capacity, just to understand it better. So is it that IndiGo would have gone to Airbus and said that we want to bring in more planes or Airbus sort of told Indigo that you have to take more planes because we were looking at 25% growth in ASK and now we've raised that in 30% to 30% when industry profitability is fairly weak. So just to understand the dynamics of that relationship. So this is Greg Taylor again. I don't really want to comment on the details of our contract with Airbus. But I want to sort of get back to what we've said in the past calls. And we continue to be primarily focused on a long term network strategy. I mean as Raul said in his prepared comments, we are building a nationwide air transportation network for the country. And our focus continues to be putting those pieces in place. The reason that we've sort of grown to more than 100 departures a day at each of the 6 metros That's the foundation of that kind of network. And so even though we have somewhat of a bubble in our capacity during these two quarters, we still are comfortable with our long term capacity plans, and we think we're on the right strategy to create value not only for our shareholders but also for our customers. So we're happy generally with our capacity strategy, although I admittedly, we have a small bubble here in the next couple of quarters. And just linked to that, so basically, is it fair to assume that the bulk of increase in capacity is A320neos And will there be operating lease, finance lease? And lastly, how are the premium, the sale and the impact premium now on the neos? That will be helpful if you could comment on the A3. Sure, sure, Binay. So firstly, yes, the bulk of the capacity is A320neos. They will likely be mainly on sale in respect like we've been doing previously. And in terms of the market, the market is still pretty robust in terms of lessor demand for sale and leasebacks. Great, great. Thanks a lot. I'll come back in the queue. Thank you. The next question is from the line of Kunal Lakhand from AXIS Capital. Please go ahead. Yes, hi, good evening. Quickly on the change in the strategy regarding the purchase of aircrafts, I think we shifted that last year we had plans of purchasing aircrafts and now we're thinking about doing sale and leaseback. Just wanted to understand the thought process there. And also like if you could give if you can share some light on in terms of what are the cash incentives in terms of trend, like how they have been considering that the fuel cost has now gone up with the market prices of NIO or for that matter, even the lease rentals for NIO is inching up. How do cash incentives as a trend look versus last year and then going ahead? Okay. So let me take them one at a time. I mean, I think if you there hasn't really been any change in our strategy. So what we had been talking about over the last year is that we want to start owning some planes with free cash flow going forward. And we've already started to do that with the ATRs. We did we do intend to buy A320s at some point with cash as well. But as we said, even at the time all along that based on the free cash we generate, we'll still only take a very small percentage of our additional aircraft deliveries through that route. And the majority of our aircraft would still would continue to still rely on the sale leaseback model to finance the majority of our planes. So when you come to today, that overall strategy is still pretty much the path we're on. Obviously, at times and what I said on the last call as well, at times when there's a little uncertainty, you want to be prudent with cash. So right now, we're holding off buying any A320s with cash and continuing to rely on the sale and leaseback model. And we'll review that periodically when we think it's the right time to start buying. Now the question on the value of A320s in the market, I think you all will see that the values are pretty strong. And so the so that has continued to hold up well. And I think that's pretty much what I said on the last question as well. All right. Yes. Thanks. Thanks. Thank you. The next question is from the line of Achal Kumar from HSBC. Please go ahead. Yes. Hi. First of all, I wanted to understand about your strategic plans, strategic initiatives. Of course, I mean, when you brought such an experienced team for the at the management level, you must have some strategic steps in mind. So if you could please remind us at the moment, what are your key strategies probably. Another thing I wanted to understand and taking the question on the capacity versus fares forward. I mean, obviously, you are growing at 35% in Q3 and 30% probably similar amount in Q4. And then you have a similar growth plans for the next year. And if the growth plans are such, of course, you want to maintain your load factor. And that means you need to offer lower fares. I could see the news, though it's typically a seasonal news or offer, you're offering 10 lakh seats at a very discounted price. I mean, so how do you think you could counter the rising fuel price softening INR with such a low fares? Obviously, it is a fixed to your plan and then to grab market share. But overall, you're losing the shareholder equity value. I mean, so how do you think how do we see the fares going forward given that you are growing at such a high level? And then lastly, I wanted to understand recently I understand that the passenger fee at Bangalore Airport was reduced significantly and that will definitely feed into your yields. And on the other side, the tax was cut by the dominant fuel, but those were very minor. So in all, together, these 2 putting together, how do you see what sort of benefit you're looking at in terms of per passenger maybe? Thank you. So that was a lot of questions. Maybe I'll take part of it and let others step in. With regard to the strategy moving forward, a lot of it I talked about in my previous comments. I mean, we're from a customer point of view, our strategy is pretty much unchanged. We continue to be focused on a very simple model of providing low fares, hassle free service and on time service. And that we think that strategy is resilient and will remain in place. We also have a very strong strategy around our employees and how we want to continue to have Indigo be a great place to work. Beyond that, I've talked already about some of the network strategy. And again, our long term plan is to build a world class network for the country. And the pieces of that are being put in place quite rapidly. When I look at more than 100 flights a day in all 6 metros, already even though we're not a true hub and spoke carrier who building banks of connections, we just naturally are creating connections. We now are offering nonstop or one stop service in over 1300 city payers. So the long term strategy of building this network for the country is really our focus right now. So I think that's my answer to the sort of top three strategy questions. The question is more generally about long term fares. We look at our capacity plan going out into the next fiscal year and we're comfortable with it right now, but we have flexibility. I mean, we our capacity plan is made up of new deliveries plus retirement of older CO airplanes. And so if we were to decide we wanted more or less, we have the ability to adjust that in the future if we need to. I mean, right now, we're comfortable where we are, but we frequently look at it. And if we need to make an adjustment, we will. And I don't know there was a bunch of fair questions that are kind of around that. Did you catch that? Anybody want to help me with that one? Well, perhaps I can just comment on the sale that you mentioned, you noticed today. Just to say that we have sales from time to time where we see periods of weaker demand. And this sale we announced today is actually effective for travel after Diwali and in the period where obviously traffic falls off after the holidays. And we are very cautious and very prudent about the number of seats looks good from a headline point of view. It is 10 lakh seats and that gives you some idea of the scale of the airline now. But it doesn't cover all the seats on the whole network and nor is the lead in price necessarily the price that applies for the vast majority of the sectors. So just to explain some of the rationale behind that. And we are always looking at our prices in a very rational fashion. Indeed, we did try a couple of months ago to put in a fuel surcharge, which demonstrates that we are, we think, behaving properly and understandably, given the higher costs that we faced. Okay. And the last question was about the passenger fee at Bangalore Airport, I think, where you have declared almost 10% of your capacity. So that's quite important for you. So passenger fees were reduced and the tax on the ATF was reduced slightly. So how do you see that? I mean, what sort of impact do you see? Yes. So obviously, those are positive steps. They're small steps, but directionally positive. If I just may comment on this operational point of view, Wolfgang here. You see globally, airline successful low cost carriers are, let's say, the size in the 200 aircraft range. You can see it in America. You can see it in Europe. So this is one element also our growth strategy to continue and improve our sustainability in terms of productivity, and this goes to all areas because we can see now we are able to upgrade majority of our new pilots within our system. Can implement we can achieve much better productivity. This applies to flight attendant in the same way. Engineering, we're getting the user infrastructure much better and I. E. Browser is upgraded. And especially also in flight operations sorry, in airport services, you have a lot of elements with, let's say, if you fly more, there's much more benefits in terms of achieving higher productivity in running the operations. And that's also that's one of our main goals, become a more even more efficient airline in the future. And that's also important when you go more internationally, you deal with big carriers, and we must be better and will be better than them. So this is also one added element in our strategy. Yes, I agree on that part. But obviously, the demand is immature in India at the moment. And if you're growing at 30%, you need to I mean, either you offer low fares to keep your low factor or you let your low factor kill, right? So it's sort of negotiation between the 2. Yes. So I think the perspective we shared here is is sort of the long term strategy that we are very comfortable with. There will be some periods where there is where capacity comes in a little quick and it takes time for demand and supply to rebalance. But overall, I think as Greg said, we're very comfortable with the plan that we have. Look, I mean capacity or demand is growing really fast. The economy is healthy in India, and we continue to see demand growing in the 20% range. So things may be out of balance a little bit in the short term. But with that pace of demand growth, we're more comfortable that it's going to get back in balance fairly soon. And sorry, this is Rahul, if I may add. You must understand that at Indigo, we are not leading the charge in terms of low fares. We have never had that policy. What you're seeing today in the marketplace and we all read the newspapers, there are players in the industry who are really hurting. And for them to raise short term cash, they have to lower fares. And we, as a company, have no choice but to match them. That's the one part. The other part is when we talk about the industry going at 20%. Within that, we may be Indigo may be growing a little bit faster than 20%. But if you look at the overall industry, it actually is almost at par with the growth in traffic. So we don't believe that there's too much capacity coming into the market. It's in line with the growth of the industry. But the other issue is the fares, which really is not being led by us because of the 30% guidance we provide on capacity growth going into the future. Thank you. Mr. Kumar, I request you to join the question queue for any follow ups as we have several participants waiting for the turn. Thank you. The next question is from the line of Sonal Gupta from UBS Securities. Please go ahead. Hi. Good evening. Thanks for taking my questions. So I just wanted to ask a question in terms of any I mean, of course, the fares are low right now and I mean, they will inflect when they inflect. But in terms of any thoughts around the price elasticity of demand? So I mean, just my broad sense is that if you have to get back to your like profitability over the last couple of years, then you probably need a 15% to 20% increase in yields. And if you have a, say, a 10% to 15% increase in yields, I mean, for the industry, what does I mean, do you think that 20% growth that you're seeing still on the passenger side, how much can this slow down? So any thoughts around that? Well, it's Willie Bolt here. I would only say that in sort of airline history, generally, markets have grown at double the rate of GDP growth. And where we have in India, a GDP growth of 8%, that would imply a sort of aviation market growth of around 16%. And that really applies whatever the pricing is. I'm obviously wouldn't we couldn't be we couldn't jack up the yield by 50%. But I think even if they went up by 15% or 20%, you would still see a very healthy growth given the GDP growth in the country. This is Greg Taylor. I'd add one just add one to it, if I may, Willie, is that we talked about what's happening inside 15 days and outside 15 days. I think if you look at literature, there's a lot of work that's been done on this over the years about elasticity of demand in the airline industry. And typically, business travel, which is usually booked inside 15 days, is very inelastic. Essentially, it doesn't respond very much to fare increases and leisure travel is quite elastic, which is why when you do a fare sale that's targeted at leisure traffic, that is revenue generative because it's quite elastic demand. If you cut fares for business travelers, that doesn't generate very much demand, it just generates less revenue. And I think that's kind of what we're seeing playing out. We mentioned earlier that outside 15 days, our yields are actually up a little bit. The real problem are discounts to inelastic travelers. Right, right. Thanks. And just one more question on like I think Rohit last call you mentioned that on the sort of the supplementary rental reserves or sorry, I mean the restricted cash that we have, we are trying to now change that to more of a dollar deposits from rupee deposits. So I just wanted to get a sense of where we are in that sense on what percentage would now of your allocation is now dollar deposits versus INR? Yes, sure. So, Suraj, we're sort of well on our way with that plan. So at the end of the quarter, we are about a third of our restricted cash is in dollars. Having said that, the mark to market for this quarter would have been higher because it happened during the quarter. So we were still subject to fluctuations during the quarter. But that number where sort of INR 1 would have been roughly equivalent INR 1 depreciation of the dollar would have been roughly equivalent to about INR 85 crores. We'll probably reduce to about INR 60 crores based on that, and we'll continue to reduce that. So our plan is to actually convert the majority of this by in another three quarters into dollar deposits. So majority, you mean like 70% to 80%, is it? It's 80%, 80% plus, maybe as far as 100%, but we'll we have to get there first. Okay, great. Thank you. Thanks a lot for answering the questions. Thank you. The next question is from the line of Anshooman Deep from ICICI Securities. Please go ahead. Yes, hi. Thanks for the opportunity. I wanted to understand the increase in significant increase in restricted cash and vice versa decrease in the free cash, if you could just get a bridge of that. That's 1. And second is like because of some of our competition not being so great, are we still in a position where we can we see there can be some gaining, some slots in key airports like Mumbai or Delhi. Is there something like that in Northing? These are the 2 questions. Sure. So I'll start with the question on free cash. Maybe Wolfgang can take the one on slots. So on total cash balance for the quarter compared to the prior quarter was roughly flat. There was a reduction in free cash and an increase in restricted cash. Clearly, we did have a loss for the quarter, so that does consume some cash. We also took delivery of new planes, which also does generate some cash with the sale leaseback, but we then also put some of that into restricted cash as security for the standby letters of credit. So what happens when you take delivery of new claims, you have to set up these letters of credit. And so that's why that consumes cash. So those are sort of broadly the key reasons why you saw that restricted free cash went down a little bit and restricted cash went up and but total cash stayed roughly the same. Both kinds of slots? Yes. On the slots and parking base, I mean, we have demonstrated in the last quarter that we could place 20 additional aircraft with parking base end slots. And looking forward, for the winter schedule, it's mostly secured. I mean, there's one or the other discussion going on with airports on the and AI on that matter. But mostly, we find homes for this aircraft. And there are actually some positive developments in India, especially the southern airports are very active, creating new parking base, hopefully also creating new slots. Other airports are really upcoming because of the growth is going more into Tier 2, Tier 3 cities, where there is capacity available. And overall, in the key constraints, constrained airports, naturally, if other airlines start withdrawing, we will be there because we get something like 6 aircraft a month. And with that, we will always be very flexible to, let's say, have the parking space occupied the parking space, which might be not used by others. So in that sense, we are well prepared to take advantage of, let's say, a growing market and also a constrained market because we have the capacity available. Thank you. Thank you. The next question is from the line of Dheresh Pathak from Goldman Sachs. Please go ahead. Yes. Thank you. So Rohit, just to understand better, restricted cash would include supplementary rentals and also forward sales, right? It includes the cash we post to secure the supplementary rental obligations. There is no restricted cash related to forward sales. That is one additional item that I didn't mention when I answered the prior question in terms of what consumed cash, which was the purchase of ATRs. We did buy 3 ATRs in the quarter with cash. So but there is no forward sales in restricted cash. So apart from supplementary rentals, what else is included in restricted cash? The majority of restricted cash is supplementary rentals. There are some cash offsetting, some letters of credit, etcetera. But it's mainly the majority of it is supplementary rental obligations. Okay. And this is not available? You is it like a bucket you create and you call it restricted cash? Or this is something which goes into an escrow sort of a thing and you can't use it even if you want to? When you say restricted cash, what do you mean by that? It's restricted because there's a lien or letter against the standby letter of credit that we that the bank would issue. So it is restricted because there's a lien on it. Now we can we always have flexibility to maybe there's always a price versus the percentage of collateralization you have that you can negotiate and change sort of and free up cash if you want, if you require it based on certain factors. But this what we classify as restricted is what there's a mean on. Okay. All right. Thank you. Thank you. The next question is from the line of Khosku Bovna from Rerev Prices. Please go ahead. Yes. So I mean, by when do you think this pressurized price environment pricing environment will eventually come to an end? Because I wanted to pose a question, I mean, crude is between $70 $80 and if we have no plans of immediately increasing pricing for the next couple of months at least, are we okay with are we basically saying that as an airline, as a company, we're okay with being in losses for the next few months, quarters? Because that's the impression I'm getting. This is Greg Taylor. So in the short term, we're moving from what is the seasonally weakest quarter into a stronger seasonal period. So that will give us some upward pressure on fares during the next couple of quarters, which will help. That being said, I'm going to go back to what I said before, which is that our focus really continues to be more on long term. And we continue to believe we're on the right strategy to build a long term viable positive network for the company. And so that's our focus. So I guess we get some help in the short term. And in the long term, we're on the right path. And with demand growing at 20% a year, the demand is going to grow into supply fairly soon. Yes. But I mean, why exactly is this I've still not been able to understand. I understand that there's a lot of capacity coming in and your every airline says there's lots of competitive pressure. But I mean, cumulatively, as an industry, you've seen great amounts of like losses because of the pressurized pricing environment. So I mean, who takes the first step, maybe not now, maybe 6 to 12 months later, maybe 2 years, 3 years, 4 years later, who takes the first step to increasing prices? Because I mean if crude comes down well and good, but let's assume crude stays at these levels, just a hypothetical scenario. So we look at this and say that it's not a sustainable situation right now. And so capacity adjustments are going to have to take place and prices are going to have to go up. And we think that will play out over some time while demand continues to grow. In the short term for Indigo, we're looking at our situation and saying we're in a stronger position than anybody else. We think our capacity plan for the next year is logical, and we have flexibility if we need to change it. And so we're sticking with a strategy that we think is the right long term strategy for the company. But who to my first question, who actually makes the first decision to raise prices? I'm not understanding. Who would take this who in the industry? Because you guys are market share leaders by quite a bit. So who takes the first decision? It's Willie Bolte here. And I'd like to look at the actual facts. And think at the end of May, it was that we put in a fuel surcharge. And so made the first move, as it were, to increase the prices. But it was not matched by the competition. Everyone can have their own reasons for doing that. But as a result, we had to withdraw that surcharge. And as I think Mr. Batya said earlier, we are not the people that are interested in having low prices. We are doing our best to lead the yields up. Okay. And on your international expansion side, any more updates as a company as in how are we going to scale up this international business as far as? I mean, first, we had in terms of inorganic opportunities, in terms of organically expanding, what's our plan? So I mentioned earlier that we continue to expand very quickly into the international using sort of all of the capabilities of the fleet we have today. I mean, we added 1 international destination during the quarter, Dhaka, Dhaka. And we've since announced and opened for sale 6 more international destinations, Abu Dhabi, Hong Kong, Kuala Lumpur, Kuwait, Mali and Phuket. And we continue to believe that these are just sort of natural opportunities for us. They're well within the capabilities of the airplanes we have. And as we've built up strong domestic networks out of large cities, we instantly get connections to 20 or 30 cities every time we add 1 of the international markets. So our plan is to continue to grow the international aggressively but opportunistically. And then the last thing I would add is that, again, we're taking delivery of a longer range A321s, which adds essentially another hour of flying, which brings another set of markets into economic viability. So anyway, we'll continue to grow the international at a pretty fast pace. Okay. Best of luck, Ken. Thanks. Thank you. Thank you. The next question is from the line of Pulkit Singhal from Motilal Oswal, AMC. Please go ahead. Yes. Hi. Thanks for taking my question. In an industry scenario where most airlines would actually think of scaling back capacity expansion, Indigo has decided to prepone the growth somewhat from 25% to 30%. It clearly seems like a very conscious decision. I just wanted to clearly understand the reasons for the same. Opportunistic availability of slots comes to mind. But what about can you talk about the availability of slots? Was that one of the decisions considered in the top 4 of iCities? And how much important is the international expansion in this decision? So that Yes. No, you go ahead, Ram. Yes. Actually, you look at the whole environment market, but also, let's say, the infrastructure, which is very rare commodity in India, you look at that. And if that's not available, it plays a role in the decision making, but not at any cost. The underlying business case must be there. We have evaluated that. And slots were available in certain cities or parking base, and then we took advantage of that. Right. So we've made a structural, there's no doubt about it. And Pulkit, this is Rahul, if I may add. I think we've said this in previous calls. At Indi, what is fundamentally different is we are not building this airline from quarter to quarter. What are we doing for the long term? But absolutely, there's limited availability of slots. I mean, it seems like a smart thing to do in that sense. But just to get a sense of slot availability, like in the top 4 or 5 cities, if you could give us some sense as to whether there's frozen, somewhat available or freely available? Yes. So if you look at the top markets, and you always have to see slots and parking bays in conjunction because a slot alone doesn't help you if you don't have a parking bay. So you need to see it both. And we see very positive developments in, let's say, in the southern cities like Bangalore or Hyderabad. Then we see positive developments in certain, what you would call, Tier 2, Tier 3 cities, which are still getting our size, which makes it possible for us to build a certain network around it. New airports are coming up. So these are the plus points. Other, let's say, the most difficult airports are naturally Mumbai, where there's hardly any possibility. And also, Delhi does not develop at that pace as we would like it. But we think in Delhi, and this is the most important market, clearly, actually, if I can call it hardware, means the allocation of the runway, how are they set up the space at the airport, there's much more potential that everybody knows that. And we think that over 1 year, we will play out that much more capacity will become available. The airport wants it. It's just necessary that everything gets coordinated in a way that it becomes available. So we can see and we have seen also in the past that actually capacity pressure is there, demand is there. So it will develop further. So overall, a lot of working to be done, but we're also cautiously optimistic. Got it. And just a follow-up to Rahul. I mean, obviously, this scenario is going to result in a lot of the domestic airlines being under tremendous stress and even some of the smaller ones. While we already know your I mean, you had intended to consider Air India and that could be for multiple different reasons. But would you be also looking at any such opportunities that may arise in the future because some of them would have good slots available? Yes. I mean, like everything else, we look at it opportunistically. But right now, we are so busy building our own business. But if something came wrong that was too good to say no to, we would certainly look at it. Got it. Thank you. Thank you. The next question is from the line of Prashant Kotari from BigDebt. Please go ahead. Hello. Yes, the first question is around the capacity addition plans. In case you or the other states were to defer their capacity addition plans, are the penalties or escalation clauses just too high? That's not very easy to do that. And the second question was around these kind of weaker plays in the industry. What would be more sensible for us, for this is for us to kind of let them die on their own? Or this is free for us to actually buy them out? Yes. So I think on the first question, I think every airline contract with their manufacturers have different sort of clauses. I think we're very comfortable with our relationships with manufacturers. And as Greg said, we can always sort of adjust capacity. We feel like we can create flexibility if we need to. We're very comfortable with our current plans in terms of the capacity. In terms of the second question, I mean, unfortunately, Ulfa. Yes. So what I said to the earlier this is Rahul Prashant. What I said to Pulkit earlier, I mean, there are 2 things going on at Indio. We are terribly busy building out what we have set out to build. But in that and then you have what's going on in the industry today. If something came along that really was very attractive, we would look at it. But that's sort of whenever that would happen, would happen. And we'll have to measure it against, is that more beneficial for us? Or should we just focus on building our business organically? And that would depend whenever that moment arrives. Okay. Thank you. Thank you. The next question is from the line of Richard Mehta from SEI Mutual Fund. Please go ahead. Yes, hi. Just a couple of questions. One, when you get a new aircraft that comes in today and from a 6, 12 month perspective, do you think it's cheaper or more economic to fly the aircraft? Or would it be more value accretive for you to sort of do a dry lease or a wet lease over a short period of time? Somebody else, I mean, you've taken it and then try and put it out in the market over there. I mean, certainly for us, I can answer the question. For us, maybe different you may get a different answer from others. But from us, we like to actually fly the planes we buy. Okay. 2nd is that if you could give us some sense of why do certain market closer show weakness despite lack of landing slots itself or capacity concerns like, let's say, Bombay, the Bumble Valley sector. And we've seen that typical yields there seem to be much lower than even what other sectors could be. So and this is a sector that's fairly constrained in terms of landing slots, So some of your insight as to why that's the case. Yes, it's Willy here. I mean the Delhi Bombay sector is probably the most competitive sector that we operate on. And it's basically a function of capacity. I mean there's a hell of a lot of capacity on that sector. There's competition. I mean we've mentioned before the fundamental issue is that the fares within the 15 day, 7 day booking windows are extremely low. And it's not us that's putting those fares out. It's generally our smaller competitors get worried about their load factor towards departure and end up putting in discounts very late in the booking cycle. And so it's a combination of those things, which leads to generally very low fares on heavily competed sectors. But I'm just a little puzzled by this because I mean Bombay, the area has been constrained for a long time for landing slots, particularly because of Bombay. And this is a business sector. And so I'm surprised that you said there is a lot of excess capacity in this sector itself. So it's just a bit puzzling itself. Well, I think it partly depends on what time of day you fly. And most business people end up flying early in the morning or in the evening. But there's plenty of other time slots where there is capacity available, even though that is as you mentioned, the slots are constrained. Okay. Okay. Thanks. Thank you. The next question is from the line of Deepika Munja from JPMorgan. Please go ahead. Hi, good evening and thank you for taking my questions. Just firstly on the cost side, I just noticed that both your rental expense and overall CASK ex fuel, if you look at it on a sequential basis, there's not been much increase despite the repeat appreciation. Could you highlight as to is there some relief on maintenance costs in the quarter? And as well as the rental costs, is there some relief because of neos coming in? So firstly, if you just look at the costs on a year over year basis, you'll clearly see that it's really the explanation is really driven by the depreciation in the rupee. Over the quarter, yes, there was further depreciation in the rupee that affected your mark to market, but the incremental effect on dollar denominated expenses in these line items won't cause that big a difference. That's why you won't see a big difference sequentially. Understood. But do you expect a meaningful improvement in these costs with the new coming in? I mean, I do understand the fuel burn being lower, but given the fact that you were doing short term leases earlier on, is there going to be a meaningful dip even in your gas fixed fuel? So I think the primary sort of benefit of neos are from the fuel burn, 15% of improvement on fuel is a huge benefit. New airplanes are have a maintenance honeymoon and etcetera, but the total cost of ownership ultimately will play out over the life. So the primary benefit of the Neos is the fuel burn. Understood. And just on the yield side once again, just wanted to understand that broadly, if demand growth is at 20% -plus and let's say your competition is taking the pricing cut. And if you stay put in terms of the pricing, I mean, won't you eventually, let's say, closer to the flying date end up meeting load factor requirements given that the demand is going where it is at? I think whenever we're on talks about yield and load factor, I mean, obviously, there are 2 bits of makeup the rest. And our focus is on optimizing the revenue per available sea kilometer. Sometimes that means we look for more demand, more load factor. Other times when we're confident of the demand, then obviously we're looking try and increase the yields. All right. Thank you. Thank you. Ladies and gentlemen, due to time constraints, that would be the last question. I now have the conference over to Mr. Ankur Goyal for closing comments. Thank you, and over to you, sir. Thank you for joining the call. Sorry because of lack of time, we could not take all the questions, but I hope you found this useful. Thank you. Thank you very much, members of the management. Ladies and gentlemen, on behalf of Indigo, that concludes this conference call. Thank you all for joining us, and you may now disconnect.