Indian low-cost carrier IndiGo does not expect to be profitable in the next 18 months, according to the CEO of InterGlobe Aviation, which operates the airline.
Currently, the airline flies about 32% of its capacity, Ronojoy Dutta said on Friday.
IndiGo is one of the largest carriers in the country, with a fleet size of 274 aircraft per June. It also serves international flights.
“It will be very difficult to become profitable at these low levels of flying. But our plan is that we should be at 75% of capacity early next year. Once we reach that number, we will see a better shot at profitable to become, “Dutta told CNBC’s” Street Signs Asia. “
“We will not be profitable for the next 18 months,” he said, adding that the focus at the moment is on positive cash flow.
The company said earlier this month that it will raise a maximum of 40 billion rupees ($ 534 million) in funds through a local placement of institutions, allowing publicly listed companies in India to raise money from accredited investors by issuing shares without a lengthy regulatory process. undergo.
“Our expectation is by next year, we should be at 85% of capacity and India a little different from other mature economies,” Dutta said.
He explained that opportunities are the segment of the top-end customers, who mainly go on business trips, will take a hit in the long run. But that is likely to be offset by increased demand in commercial air travel.
An undelivered Airbus passenger jet, operated by IndiGo, on the asphalt at Toulouse-Blagnac airport on 15 May 2016.
Bloomberg | Getty Images
Indians usually travel by train from the state, which can take days to reach their destinations. This offers an opportunity for low cost carriers like IndiGo and others to sell cheap flights that can reduce travel time.
The coronavirus pandemic has led to an almost total collapse in the demand for air travel, forcing airlines to cut costs by stopping flight routes, laying off staff and reducing their fleet.
Last month, InterGlobe Aviation reported a tax loss of 28.42 billion rupees ($ 379 million) in the three months ending June, compared to a 15.09 billion rupee profit a year earlier. Revenue fell more than 91% for the four years after flights were grounded for about two months when India went into a national lockdown.
IndiGo also announced that it would leave 10% of its workforce and senior management, including Dutta, has taken a pay cut.
“We are constantly looking at our cost structure. We have taken some painful steps in employee costs. At the moment, we have no plans to go any further,” Dutta said. That could change as business circumstances continue to disappear due to the pandemic, according to the CEO.
India is one of the least affected countries in the world, with more than 3 million reported cases. The Ministry of Health says a large percentage of affected people have been discharged.
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