Updated: November 2, 2017 1:51:46 am
The four-fold on-year spike in September-quarter net profit, which the country’s largest airline IndiGo reported on Tuesday was “significantly” aided by the compensation it received from engine maker Pratt & Whitney and airframe manufacturer Airbus on account of grounding and delayed delivery of A320neo aircraft. While the airline did not disclose the financial details of the payouts it received, sector analysts believe it to be upward of Rs 100 crore.
IndiGo’s net profit for the reporting quarter stood at Rs 551.56 crore, compared with Rs 139.85 crore during the corresponding period last year.
While HDFC Securities said IndiGo received Rs 100 crore as compensation, ICICI Securities noted in a research report pegged it to be more than Rs 140 crore. “InterGlobe Aviation reported a strong performance in Q2FY18 with a PAT of Rs 5.5 bn (Rs 550 crore) compared to consensus estimates of Rs 3.2 billion (Rs 320 crore) driven by better fares, which increased 11 per cent Y-o-Y and credits received from Pratt & Whitney (P&W) for aircraft grounding and delivery delays. Based on passenger revenue of Rs 45 billion (Rs 4,500 crore) and ancillary revenue of Rs 6.2 billion (Rs 620 crore), the compensation received from P&W would be more than ~Rs 1.4 billion (Rs 140 crore),” according to the ICICI Securities note authored by research analyst Ansuman Deb.
An e-mail query sent to IndiGo seeking details of the reported compensation amounts did not elicit any response.
During the post-earnings analyst call on Tuesday, the airline’s management, while declining to give any details of the compensations due to its “confidential contractual arrangements”, had said that the payouts from manufacturers were on account of loss of revenue due to grounding of planes as well as reimbursement for some operational expenses incurred by the airline due to delays in deliveries of aircraft.
Notwithstanding the compensation received from manufacturers, the airline has also, in the past, acknowledged facing operational difficulties due to the problems with Pratt & Whitney’s new geared turbofan engines on the A320neo aircraft. IndiGo, on certain days, has seen as many as nine of its aircraft grounded due to unavailability of spare engines leading to flight disruptions.
In the previous conference calls, IndiGo’s president and wholetime director Aditya Ghosh had said: “We continue to have a higher number of engine removals, and sufficient spare engines have not been available. The operational disruptions are quite challenging, and we are not happy with that situation”.
Furthermore, various A320neo aircraft operated by IndiGo have suffered from mid-air engine snags because of which the flights had to make unplanned landings. On September 20, an aircraft on its way to Bangalore had to return back to Bhubaneswar shortly after take-off, after unusual vibrations were witnessed on one of its engines. In August another IndiGo aircraft flying to Kolkata from Ahmedabad had to be diverted to Nagpur after a technical snag developed in one of the two engines.
On Tuesday, during the analyst call, the low-cost carrier’s management also reported that the company had started receiving spare engines and that none of the aircraft, earlier equipped with the snag-ridden engines, were grounded anymore.
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