IndiGo's Revival Bid

After a brutal year, India's largest airline looks to bounce back, but there could be surprises ahead

- Manu Kaushik

On March 25, 2020, all 259 aircraft of India’s largest airline by market share, IndiGo, were grounded as the government suspended commercial flights — domestic and international —indefinitely due to rising Covid cases. While Indian aviation has seen numerous ups and downs, the MarchMay 2020 period was the worst-ever.

As the market leader and the country’s largest low-cost carrier (LCC), the scale of damage for IndiGo was bigger than the rest. While revenues stopped coming, fixed costs started eating into profits, and in turn, cash reserves. In April, agencies such as CAPA India predicted a loss of $1.5 billion for IndiGo and SpiceJet over the next six months. The impact was so brutal that some brokerages stopped tracking the sector, and IndiGo in particular. “We believe the impact on aviation sector will be severe and the ability to forecast financial consequence is difficult today, given the evolving nature of the situation. We are dropping the stock (IndiGo) from our coverage in the short-to-medium term,” Geojit Financial Services said in a note issued in May.

Not surprisingly, during the nine months between April and December 2020, IndiGo reported net losses of ₹4,659 crore (against a net profit of ₹698 crore a year ago), while revenues shrank 67.5 per cent year-on-year.

Yet, CEO Ronojoy Dutta remains confident. In the March 2020-quarter earnings call, he told a bunch of harried investors that IndiGo wants to emerge from this crisis stronger than ever. “In that context we are paying particular attention to our product, our costs, our brand and our employee culture,” Dutta had said.