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IndiGo eyes capacity surge in Q3 as aircraft deliveries ramp up

IndiGo will grow capacity by 35% year-on-year for the upcoming third quarter, thanks to a ramp up of new aircraft deliveries from Airbus.

Speaking during an earnings call, the carrier's chief financial officer Rohit Philip explains that capacity increase is being driven by a ramp up in the number of A320neo it will receive in the coming quarter "to make up for the delays" in planned aircraft deliveries earlier in the year.

Those delays have mostly been caused by a shortage of Pratt & Whitney PW1100G engines, which the engine manufacturer and Airbus are now catching up on.

IndiGo also expects to receive its first A321neo in November, and has earmarked the type for launching more international services.

Flight Fleets Analzyer shows that it has 25 A321neos on order, with deliveries scheduled out to 2021.

Over the full-year, capacity is set to increase capacity by 30% year-on-year, which Philip admits will put pressure on unit revenues.

"In this growth phase, when new capacity is being added, the RASK is generally lower as it takes time for new markets to mature," he says.

For the quarter ended 30 September, IndiGo's RASK declined 8.1% year-on-year amid strong competition in the domestic market. Its load factor was flat at 84.5%.

Senior advisor Gregory Taylor adds that it is taking a long-term view towards its planned network growth over the next two quarters.

"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. We think we are on the right strategy to create value, not only for shareholders but for our customers," he says.

Separately, Taylor downplayed the likelihood of IndiGo stepping into the long-haul market in the near-term, saying that the proposal to was "still an aspiration, rather than a plan".

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