IndiGo reports quarterly loss as costs surge and capacity falls

Indian budget carrier IndiGo reported a fourth-quarter loss on Friday as the country's largest airline faced pressure from domestic capacity constraints, a weakening rupee, and higher fuel prices.

The airline posted a loss of 26.62 billion rupees ($280.2 million) for the quarter ended March 31.

This compares with a profit of 30.73 billion rupees recorded during the same period a year earlier.

The results reflected a challenging operating environment during the quarter, with higher costs more than offsetting modest revenue growth.

Capacity cuts hit operations

During the quarter, IndiGo was required to reduce its domestic capacity by 10% following directions from India's aviation regulator.

The reduction came after mass flight cancellations in December.

The disruptions triggered one of the country's most severe aviation crises and ultimately led to the abrupt departure of the airline's chief executive officer.

The capacity curbs limited the airline's ability to expand operations in the domestic market during the reporting period.

Revenue growth fails to offset higher expenses

IndiGo's quarterly revenue increased by 1.3% from a year earlier.

However, expenses rose at a much faster pace.

The airline's costs jumped nearly 31% during the quarter, significantly outpacing revenue growth and weighing on profitability.

The sharp increase in expenses contributed to the company's shift from profit to loss despite continued revenue growth.

Weak rupee drives forex losses

Currency movements also played a major role in the airline's performance.

More than 60% of IndiGo's costs are either directly or indirectly denominated in US dollars.

As a result, the depreciation of the Indian rupee increased the airline's overall expenses.

IndiGo reported foreign exchange losses of 48.82 billion rupees during the quarter.

This marked a sharp reversal from the gain of 1.38 billion rupees reported in the corresponding period last year.

The substantial forex losses added further pressure to the airline's earnings and contributed to the deterioration in its bottom line.

Fuel prices add to margin pressure

Higher fuel costs also affected the airline's profitability during the quarter.

Fuel prices rose because of supply constraints that followed the Iran war.

The increase in fuel costs reduced operating margins for the carrier.

Airlines such as IndiGo, which do not hedge fuel costs, have been particularly exposed to the surge in jet fuel prices.

The conflict pushed crude oil prices above $100 per barrel, increasing operating expenses across the sector.

The combination of elevated fuel costs, foreign exchange losses, and regulatory-imposed capacity reductions created a difficult environment for the airline during the quarter.

While IndiGo managed to deliver revenue growth, the increase was not sufficient to offset the impact of rising expenses.

The airline's results highlighted the challenges facing carriers as they navigate higher fuel prices, currency volatility, and operational constraints.