India’s largest airline, IndiGo, is seeing significant progress in reducing the number of grounded aircraft, as its fleet recovery from en...
"We have turned the corner as the number of grounded aircraft and associated costs have started reducing," IndiGo CEO Pieter Elbers announced during an investor call, following the company’s financial results for the September quarter. The airline’s fleet, the largest in India, had 410 aircraft as of September 30, but engine issues previously sidelined over 70 of them.
A Return to Stability After “Costlier Mitigation Measures”
IndiGo has adopted several mitigation strategies to address the grounded aircraft shortage. These included taking planes on damp and secondary leases, extending leases on existing aircraft, and delaying the retirement of older planes. These measures, while ensuring operational stability, imposed substantial costs on the airline. Now, with grounded aircraft numbers declining to the “high sixties” and projected to drop below 60 by the end of the year, IndiGo plans to gradually reduce its reliance on these temporary solutions.
Chief Financial Officer Gaurav Negi stated that by early FY26, grounded aircraft numbers should reach the “mid-forties,” reflecting an overall downward trend. “The trajectory we were experiencing, where the AOGs [aircraft on ground] were increasing, has now taken a turn,” he added.
Financial Impact and P&W Compensation
While Pratt & Whitney provides compensation for the grounded aircraft, it has not been enough to offset the full impact of IndiGo’s mitigation costs, which weighed heavily on the airline’s finances. The company reported a surprising net loss of nearly Rs 1,000 crore in the September quarter, a stark contrast to the Rs 190 crore profit achieved in the same period last year, ending a streak of seven consecutive quarters of profit. The added costs associated with fuel, inflation, and mitigation measures drove total costs up by nearly 22% year-on-year to Rs 18,666 crore, with fuel alone increasing 13% to Rs 6,605 crore.
Despite this setback, IndiGo saw a revenue boost of 14.6% year-on-year, reaching Rs 17,800 crore. “In a traditionally weaker second quarter, results were further impacted by headwinds related to groundings and fuel costs,” Elbers noted.
Engine Issues and Long-term Resolutions
Pratt & Whitney’s engine issues have been a persistent problem for IndiGo. In July 2023, P&W identified a defect in the powder metal used in its geared turbofan engines for the A320neo, affecting airlines globally. The defect could cause component cracking, leading P&W to recommend accelerated inspections. As a result, IndiGo grounded additional aircraft beyond the 40 already sidelined.
The strain from these additional “costlier mitigation measures” led IndiGo to bring in 31 new aircraft, nine of which were part of its strategy to address the grounding-related shortage. Negi stated that as grounded planes begin reentering the fleet, IndiGo plans to phase out short-term leases, gradually alleviating some of the financial burden.
Looking Ahead: Market Position and Growth Prospects
IndiGo remains committed to growth and expansion, despite the recent challenges. With the grounded aircraft situation stabilizing, the airline expects cost reductions from returning aircraft and the gradual easing of fuel price pressures. The demand for air travel in India remains robust, offering growth potential as operational efficiency improves.
As IndiGo recovers from these setbacks, analysts anticipate a moderation in costs and a positive trajectory in profitability. With P&W’s ongoing efforts to rectify engine issues, the outlook for IndiGo suggests a return to its high-flying performance as grounded aircraft steadily rejoin its active fleet, securing IndiGo’s leadership in India’s aviation market.
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