IndiGo’s operational meltdown in December last year was among several exceptional items that weighed on the low-cost carrier’s financial performance during its fiscal third quarter.
The Indian airline estimated during an earnings call on 22 January that the 3-5 December incident – which saw it delay and cancel thousands of flights across its network – and the costs associated with the aftermath, including for passenger compensation and a fine imposed by Indian authorities, amounted to a Rs5.8 billion ($63.3 million) hit to its earnings for the October-December period.
Speaking on the call, chief executive Pieter Elbers acknowledged that IndiGo “fell short of the standards we have set for ourselves and our customers” as its operations failed to cope with the adoption of new Flight Duty Time Limitation (FDTL) rules in the country.
“We’re in the process of conducting an in-depth review of the robustness and resilience of our internal processes to ensure we emerge stronger out of the event,” Elbers states.
He also insists that IndiGo is now ready to again adopt the FDTL changes in February, after the Ministry of Civil Aviation suspended their rollout in light of IndiGo’s challenges.
“We have strengthened some of our internal processes and are preparing thoroughly for the transition to the revised FDTL norms in February,” Elbers says.
In handing IndiGo a Rs222 million fine earlier in January, regulators found that the airline had an “overriding focus” on maximising the utilisation of its crew, aircraft and network resources, a move which “significantly reduced” rostering buffer, contributing to the disruption in December.
IndiGo’s third-quarter financial performance was also hit by the depreciation of the rupee – down 5% year on year against the US dollar – which wiped another Rs9.7 billion off its profits, and a one-off charge of Rs10.4 billion relating to the adoption of new labour laws.
All told, IndiGo’s profit after tax for the quarter was Rs5.5 billion, down from Rs24.5 billion year on year, on revenue up 7% and capacity 8% higher.
Elbers says IndiGo’s “long-term fundamentals remain strong, backed by our expanding fleet, growing domestic and international network”.
