InterGlobe Aviation (NSE:INDIGO) Q1 2027 Earnings Call

0:00 Ladies and gentlemen, good evening, and welcome to INDIGO's conference call to discuss the first quarter of fiscal year twenty twenty seven financial results. My name is Sagar, and I will be your coordinator. At this time, the participants are in a listen only mode. A question and answer session will follow today's management discussion. As a reminder, today's conference call is being recorded. I would now like to turn the call over to your moderator, Ms. Richar Chabra, Head of Investor Relations at INDIGO. Over to you. Good evening, everyone, and thank you for joining us for the first quarter of fiscal year twenty twenty seven earnings call. We have with us our Managing Director, Mr.

0:47 Rahul Bhadia and our Chief Financial Officer, Mr. Goran Negi, to discuss the financial performance and are available for the Q and A session. Please note that today's discussion may contain certain statements on our business or financials, which may be construed as forward looking. Our actual results may be materially different from these forward looking statements. The information provided on this call is as of today's date, and we undertake no obligation to update the information subsequently. We will upload the transcript of prepared remarks by day end. The transcript of the Q and A session will be uploaded subsequently. With this, let me hand over the call to Mr. Rahul Batyam. Good evening, everyone, and thank you for joining us on this call.

1:35 Today, we announced our first quarter of the financial year twenty twenty seven results. This quarter, we reported a loss of around INR 2,000,000,000. The aviation industry and in particular, the Indian aviation industry continues to operate in an environment that is promising yet demanding. In the near term, what is very clear is that fuel costs remain elevated, and we continue to operate in a very volatile environment. This makes disciplined execution even more important, protecting the business in the near term while staying responsive to fast changing market conditions. The quarter was marked by a constructive pricing environment and our ability to pass through a part of the elevated fuel and operating cost pressure in a disciplined manner.

2:29 While the quarter saw a sharp increase in costs, the revenue improvement needs to be assessed together with the movement in fuel and other costs. At the same time, it is equally important that we do not let short term volatility cloud the long term opportunity. Indian aviation remains one of the most compelling structural growth stories in the world. India is still a severely underpenetrated aviation market, rising incomes, greater mobility, a young population, expanding aspirations and continued investment in aviation infrastructure, all point in the same direction. As we reflect on this, it is important it is also a moment to reflect on INDIGO's journey.

3:16 We began in 2006 with a simple belief that air travel in India could be more accessible, reliable and consistent. Over the last twenty years, this belief has translated into meaningful impact, connecting more and more cities from heartlands to metros to international markets, serving millions of passengers and making air travel a practical choice for a wider sector of India. As we build INDIGO for the long term, we have signed an MOU with CFM International for over 1,000 LEAP-1A engines for our future aircraft deliveries. This MoU also supports the development of an engine MRO and long term material services.

4:04 It is a clear step towards gaining structural strength, investing ahead of growth and building the platform INDIGO needs as we scale into a larger and more global airline. That same long term thinking also shapes how we view the network and fleet choices. The domestic and short haul business will remain the heart of INDIGO with our single aisle program anchored by the Airbus A320 and A321 family aircraft being central to the future of the airline. Alongside this core, international expansion and product evolution will be important parts of INDIGO's next phase. This expansion is about building a footprint in a disciplined and fit of purpose manner.

4:50 Kindly now let me hand over the call to Gaurav to discuss the financial performance in detail. Thank you. Thank you, Rahul, and good evening, everyone. Let me start with sharing the operating context that we experienced during the quarter, which is important to understand the financial performance for Q1 FY 'twenty seven. The quarter was shaped by three broad factors impacting the outcome: one, major capacity deployment driven by geopolitical situations in The Middle East and optimization of our schedule as we transition into a seasonally weaker period starting June 15 onwards. Number two, pricing actions as a countermeasure to offset the pressure on economic performance and outcomes.

5:39 The revenue environment improved meaningfully on a year over year basis, supported by pricing actions, healthy loads and base effect. Point number three, elevated cost environment led by fuel, currency and inflationary pressures. Now first, moving on to the financial performance for Q1 FY 'twenty seven. We reported a total income of INR $256,000,000,000, a growth of around 19% year over year with a yield growth of 21.3% and a load factor reduction of 1.3%. Despite a volatile environment, passenger demand held up as we served 31,300,000 passengers, a growth of 1% year over year. In terms of profitability, EBITDA came in at 38,300,000,000 at a margin of INR 15,600,000,000 compared to an EBITDA of INR 57,400,000,000 and a margin of 28% for the same period last year.

6:40 For the quarter, we reported a net loss of INR 2,400,000,000 compared to a profit of INR 21,800,000,000 in the same quarter last year. Excluding the impact of currency movement, we reported a net loss of 56,000,000 compared to a net profit of INR 23,000,000,000 during the same period last year. The June quarter's capacity growth came in at 3% on a year over year basis, broadly in line with our guidance. Capacity deployment during the quarter remained impacted by geopolitical developments, particularly airspace related constraints and disruption in certain international corridors. As the quarter progressed, we adjusted capacity with customer demand in mind.

7:28 We moved capacity to markets where demand was holding up better and took measured action on routes affected by disruption. This helped us stay responsive to changing travel patterns while keeping the network aligned with customer needs. Moving to the demand and revenue. The quarter demonstrated the strength of an underlying demand base and the benefit of a more disciplined pricing environment. While demand conditions were not uniform across the market, the month of April, the demand and load factors reflected the combined impact of disruption, constrained customer sentiment in certain markets and network recalibration. May was a standout month for Indian aviation, the best month even for the domestic industry, reflecting healthy recovery.

8:19 For INDIGO, it was a landmark month as we carried over 10,000,000 domestic passengers, our highest ever underscoring the strength of our network, our execution and the trust of the customer, which continue to be placed on us. June remained constructive from a revenue environment perspective with yields holding up well even as part of the international network continue to be managed selectively. International capacity is largely recovered during the month, supporting an uptick in revenue. Driven by the disciplined pricing actions and demand supply dynamics, the passenger unit revenue came in at 5.03, which is 19% higher on a year over year basis. This is slightly better than our guidance as June sustained the positive revenue momentum.

9:09 The yields came in at 6.04, which is around 21% higher compared to the same period last year and a load factor of 83%, which is 1.3 points lower as compared to the same period last year. On the cost side, fuel remained the largest source of pressure during the quarter. Global fuel markets continued to be influenced by developments in The Middle East, resulting in significant volatility. While average Brent prices were up by around 50% year over year, elevated crack spreads drove benchmark Singapore jet fuel prices higher by nearly 120%. We saw a timely intervention by the government, which was followed by our partners from the oil marketing companies to limit and moderate the prices of domestic ATF during the months of April, May and first eight days of June.

10:04 This support enabled us to continue to operate largely as per our planned schedule and also pass on the benefits to the domestic passengers in the form of lower fuel charge. Despite these measures, our fuel cash increased by around 80% year over year. We're also thankful to the airport authorities, airport operators and the partners for their continued support. Further on a year over year basis, cash ex fuel ex fuel fuel ex around 11% higher year over year due to inflated dollar denominated costs due to the depreciation of the Indian rupee by more than 11%. The lower utilization in parts of the quarter leading to a lower ASK base and annual contractual escalations.

10:54 In this environment, we have stayed focused on cost efficiency and levers within our controls to reduce the impact of margins. We are prioritizing flying our more fuel efficient aircraft and not operating our older aircraft wherever commercially appropriate. We've also tightened our discretionary expenses and deferred increments of senior level employees. Now moving to the fleet. We inducted a total of 13 aircraft from our original order book, which were all inducted through our entity in the Gift City. We redelivered nine aircraft from our original order book and 13 damp leased aircraft during the quarter, resulting in a total closing fleet of four thirty two aircraft at the quarter end.

11:40 Let me now turn to the network and key developments during the quarter. During Q1 FY 'twenty seven, we commenced flights to Jammnagar, reinforcing our commitments to strengthening domestic connectivity while selectively building our international footprint. We also became the first airlines to command operations from Jaewar Airport in Noida, further deepening our presence in the NCR Airport system and positioning us well for long term growth in one of India's most important catchment areas. On the product and ancillary initiative, there is an important customer dimension to the industry's evolution. As aviation became more mainstream in India, customers are looking for more choices, more flexibility and more seamless travel experiences.

12:26 As the market evolves, customer has different needs across different journeys. Our task is to respond to these needs without losing the essence of INDIGO. In the same direction, we introduced light fare for customers, traveling without check-in baggage with flexibility to purchase add ons. This supports customer choices and revenue diversification while remaining consistent with our simple, efficient and operating model. We continue to strengthen our loyalty program ecosystem through partnerships that deliver greater value beyond journey itself. Our collaboration with the core all loyalty platform, which recently went live, extend meaningful earning and redemption opportunities across travel and hospitality, enhancing customer engagement and reinforcing INDIGO's blue chip long term proposition.

13:15 Further during the quarter, we also tested SITA's Opticline and AI powered flight optimization solution aimed at improving fuel efficiency. These initiatives reflect our strategy in action, expanding the network in a disciplined manner, giving customer greater choices and building ancillary revenue streams and continue to strengthen the efficiency that sits at the core of INDIGO model. Turning now to the balance sheet side and liquidity. We ended the quarter with a total cash of INR $529,000,000,000, of which free cash was INR $390,000,000,000 and restricted cash was INR 139,000,000,000. The capitalized operating lease liabilities stood at $538,000,000,000.

14:00 The total debt, including capitalized lease operating lease liability stood at INR $815,000,000,000, with the right of use assets at INR $550,000,000,000. In terms of the cash utilization during the quarter, we made deliberate capital allocation towards assets that strengthen the platform for the long term, including the purchases of four engines through the Gift City entity and partial payment towards acquisition of land for our unified campus. As we enter the seasonally softer demand period and continue to manage fuel and airspace volatility, we are adopting a prudent and a measured approach to capacity. We are rationalizing capacity by selective boot level actions and few temporary international suspensions.

14:48 As a result, we are expecting a flattish capacity growth in Q2 of FY 'twenty seven compared to the same period last year. In terms of unit passenger revenue, or PRASC, for Q2 FY 'twenty seven, with the current balanced demand supply equation and a higher fare holding up, we are expecting growth of more than 25% compared to the same period last year. Now in closing, the June quarter reflects the strength of the revenue environment and the depth of the demand base, but also the realities of highly elevated costs. We will continue to manage business with discipline, balancing growth with economics, capacity with demand and near term volatility with long term strategic priorities. Our focus remains on reliability, cost efficiency, balance sheet strength and long term shareholder value.

15:38 With this, let me hand it back to Richard. Thank you, Rahul and Gaurav. To answer as many questions as possible, I would like to request that each participant limit themselves to one question and one brief follow-up question if needed. And with that, we are ready for the Q and A. Thank you very much. We will now begin with the question and answer session. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assemble.

16:28 Your first question comes from the line of Gurupashankar N. J. With Aventis. Please go ahead. Good evening, and thank you for the opportunity. My first question is on the yields. While you have highlighted that the past at least is expected to be higher 25%. What's been the impact you've seen so far with respect to load factors? And is that one of the key reasons why there is a rationalization exercise with respect to capacity and that the guidance is flattish on a relatively lower base on a Y o Y? So, Prabha, the way Q1 panned out for us, we already had at least a 21% increase in the yield.

17:17 The load factors did not go down significantly. It was just a 1.3% decline on the load factors. As we are looking into Q2, we are seeing that the price discipline is still holding up in the market. And as a result, the yields have been tapering upwards, and that's why the guidance for Q2 is 25% and north of 25. We're expecting the loads to be flattish or slightly down, similar to what it was in Q1, but that's largely driven by the fact that a large part of the capacity has also been reduced, which is typical of this quarter. Even last year, we had tapered down or optimized our capacity given that it's off season quarter. So with the decline in the capacity deployment that we've done, we are seeing that the pricing discipline is still holding up. We are able to push our prices and the loads are also sticking. So that's how we are looking at Q2.

18:12 Got it. And second one is on the RASK minus CASK. So just wanted to get a sense, given the cost escalations, is there a number you want to keep as a bottom number or a spread number, which you would be comfortable with going ahead until which there can be increasing hikes with respect to pricing? Is that something which is in the bottom of the calculation, which is always in the concentration when you take this hike? The endeavor is always going to be economically viable propositions so that we keep having a healthy spread. But as you're well aware, the kind of environment that we are in right now, the fuel and the currency have been the biggest drag.

19:04 So given how things had shaped up in Q1, we managed it well. We were hoping that this is behind us because large part of the conflict was coming to a close. We've recently started to see some clear up. But our endeavor is always going to be to make sure that there is a healthy spread. And towards that, we'll keep working. But the external factors are just too significant. The headwinds are too significant. But like we said, we keep testing higher levels of yields in order to offset largely the increased levels of cost that we are experiencing. So there's no kind of a target, but we just want it to be a healthy kind of a spread. Got it. Thanks for answering. I'll get back in the queue. Thank you.

19:51 The next question comes from the line of Pulkit Batten with Goldman Sachs. Please go ahead. Sir, thank you for taking my questions. I have a couple. Firstly, any change to your full year guidance given that your second quarter guidance is a flattish one after first quarter also been relatively weak. So how should I look at your full year ASK guidance? That's question number one. We are holding to the guidance that we gave at the Analyst Meet. So it's in single digits. So it was already tapered down. But post 'twenty seven, we had already given a also given a guidance that we'll be back to early double digits. So given the external factors, we are still holding to the single digit guidance that we were on capacity.

20:38 Sure. That's useful. Got it. My second question, it's not typically asked, but would you be able to talk about on a rupee basis, what has been the cost of fuel that you have paid in this particular quarter? And I'll tell you the reason why I'm asking this. Has our fuel consumed per ASK changed meaningfully between the last few quarters and this quarter? That number would be helpful for us to just gauge that. No. So when you say the only change, there are two elements of change in the fuel, one is the rate and the consumption. So there's no change on a per ASK basis as far as the consumption is concerned. Only driver of it has been the rate. And the rate, as you're very well aware, have been going up, and that's been the biggest part of the mitigation that we've been working in Q1.

21:33 And for the quarter, what's that rate, if you can talk about effective number? No. So again, it's going to be if you look at the reference point, if you look at March, because the way the pricing for fuel worked out, March was a reference point when in April 1, where the support came in both from the government and the oil marketing companies where they said that the increase in the fuel rates is going to be capped at 25% for the domestic space. So that was defined from April 1. It worked out in April, it worked out in May. And until the June 8, this particular methodology worked out. While the international always was at the market rates, which was where the MOPAC was trending. Post the June 9, even for the domestic space, we've got the market rates, the MOPAC rates that has kicked in. So it's kind of the way the quarter played out.

22:25 April 1 till June 8, there was a defined kind of a formula, which was supported by the all marketing companies for all airlines that is going to be referenced to a March pricing that you had, a 25% cap on that, plus you've got taxes on that and excise duties. Post the ninth, the reference then shifted, then it was back to the market rates, which any which way played out for the international space that we so all domestic had this, international was always at market rates. Additionally, this was just for the public sector kind of oil marketing companies. The private, in effect, have their own rates that were in place, which was, again, linked to the market prices that were applicable in March.

23:20 Sure. I'll take this offline because my implied calculation is showing that the effective rate is close to INR 150 per liter. I'm not sure if that's the right number. So maybe I'll check with you offline to get a better understanding of this. Sure. Sure. Thank you. Thank you. The next question comes from the line of Arun Sharma with Citi. Please go ahead. Hi, good evening. Thank you for taking my question. Kind of continuing on the fuel cost part. If you look at the fuel CASK, that is up almost 60% quarter on quarter and 80% Y o Y. Now I understand that there was a gap in the fuel cost increase, but there have been multiple releases and press releases by the OMC that, you know, fuel price would not be increased. I think, May, it wasn't.

24:16 Even after that, a 63% quarter on quarter fuel CASK increase, what would be the key drivers? Because even after June 9, if it was a free market for a major part of the quarter, the growth might not have been as as much as the numbers kind of reflect. If you could show some more light on how the fuel gas increase of 63% quarter on quarter ties up with the actual fuel that you've paid for? So Arjun, if you look at since you're doing a quarter over quarter comparison, if you look at January, February and March, so there were three kind of reference. So the fuel was increasing significantly in March. So it was in the early 80s from a SyncJet standpoint.

25:02 It went to around 82 ish in February, and then there was an increase that happened in March. So March becomes the baseline when you do the quarter comparison because March became the reference point for April and May and the eight days of June that you have. So you were already at an elevated level of a base on which then there was this formula that was being applied, which is 25% that was being applied for domestic plus the VAT and the taxes, the excise duty and VAT that you have to apply. So that played out on the domestic front. International, any which ways was the same philosophy of pricing that applied prior to the war was getting applied. So the mix of that was the driver of the fuel going up to 63%.

25:48 Additionally on that, this was only up to June 9. Beyond the June 9, it was anyway back to the same methodology of pricing, which was Mopac linked. So combination of these two factors, plus the fact that we had international, which was anyway that market, which was 2x of the reference point that you had because the market the fuel prices had gone up by 120% between March and then April, May, June. International was at 120%. Domestic was being capped at 25% with additional impact of that as well as excise. And the private players that we had were anyways pegging their pricing at the market prices. A combination of these three effects is what will give you the 63% that you kind of see in the results quarter over quarter sequentially.

26:39 So your starting base itself, March was on a higher level compared to January and February. Add to that, the elements that I kind of called out is what is driving the 63% increase in the quarter over quarter. Got it. And second question would be on the fleet part. So is it fair to assume that damped lease will eventually go to zero? And is there any given that second quarter would be a flattish capacity growth quarter? Is there a rethink on the fleet strategy for the year? Or does it continue as usual in adjusted for the damped steel aircraft being given away? The fleet strategy is again, the only favoring that we've done is the older technology CEOs have some have been part given the environment. The fuel is the fuel levels are extremely high. It doesn't kind of necessitate that we need to be operating those.

27:38 The damp leases, yes, we've returned most of the damp leases. So we'll again assess the situation as we come into Q2. Q3, there, we'll have to probably look at what is the external environment, especially related to Middle East. Has that improved? Has the fuel levels moderated down? And if the demand situation has started to improve and the cost has started to taper downwards. We will reassess that situation to see if we need surge capacity in the form of damp leases. So outside of that, our own fleet continues to be to be on plan. Damp lease, we'll assess in Q3. All right. Thanks. And if I could just ask a comment on where are you in terms of Middle East capacity? Is it normalized? Or how much is the headroom for further normalization, The Middle East via N2?

28:28 Yes. End of June, we were actually up to the same close to 90, 95 percentage levels of what capacity we were operating. We were close to 150 prior to the war, departures that we had on a daily basis. It went down to around twenty and thirty at the peak of the crisis. Over the course of June, then we started to ramp back up again. We were close to, again, 130 plus. But now we are assessing the situation that's developing over there. Today, probably it's going to be in the north of 90% capacity that we are operating. But we continue to assess the situation because the crisis has again kind of flared up. So that's where we are. But our intention is to keep operating Middle East till the point it's safe for us to operate at the maximum amount of capacity that we can put in.

29:22 The next question comes from the line of Shabri with MK Global. Yeah. Good evening. So my question is also on the fuel side. So for the reported number in June was something like 110 or 115 rupees per liter for ATS. So was that also a cap number or did you account it's much higher than that while taking the market rate after May? No. Probably I'll try to address it. Pre the war, the fuel was operating somewhere close to 85%, 90% in terms of ATF. When the war kind of broke out, the fuel prices went up by 120%.

30:08 So it was touching more the Synjet also, it's not Brent, but the Synjet and Mopac started to touch close to 180% to 200% because of the 120 increase that happened. So that's where they were operating at. With that base of March that you start taking and you put a kind of a cap, at least on the domestic side, it's 125% was the cap that was put. On top of that, there is VAT and excise duty that you need to add on to. International operated at 180 plus at that because there was no relief available on the international. So when you blend these two together, you'll get an average rate. It could be somewhere around 140 between the international and the domestic space. Now in this, this is the portion that comes to you from the public sector, oil marketing company partners that you have. You also have private players offering you fuel. The private players did not not all of them, some of them did, but not all of them moderate the pricing related to fuel. They continue to operate at the market pricing that was applicable to the international kind of pricing.

31:11 When you blend these two, you will get the 60%, which is closer to 140 kind of ABS price levels or as an average for the month for the quarter Q1. Now during this period, especially in June, at the back end of June, the APS did start to moderate downwards at an aggregate level, but it's again linked to the averages that are there. So it did come down to 110. On a market level, it was probably tapering from 180,120, it came down to 140 and then it further tapered downwards. So there was a period when the ETF did come down, but now it's again flying back up. So today, if you were to look at ETF, my guess is it's going to be somewhere around $140 to $150 at international go back levels.

32:01 So the fuel has moved significantly. But when you add these things together, which kind of there are different drivers to it, a combination of support that came from the online marketing companies, the additional VAT and excise that you have to add on to it, the fact that there were two periods in this April to June 8 and then June 8 to June 30, plus the private supply that comes from private players, a combination of that will give you the 63% increase, which from a base of 9085% to 90% that was there in March. When you add on the 60%, it's somewhere close to 140%, 150% what I think was also mentioning. Right. So currently also the rate is sort of similar, dollars 90 of Brent and another $50.60 dollars of Fintech margins?

32:51 That's right. Right. And second question is on your on the capacity. So this whole capacity thing is very significantly connected to the midget scenario. Is that right? No. Capacity for Q2, you're talking about or you're talking about Q1? No. Q I mean Q1 also and Q2 that you have like given a flat guidance. So Q1 was largely Middle East driven because obviously, we had a huge amount of cancellation. Q2 is, again, a prudent call that we typically take, where we taper down our capacity, especially for off season markets. So we've already given a communication that six of the destinations on the East Side, Also, we had moderated down those capacities. We kind of suspended operations, which will restart back in again in October, places like Lankavi, places like Ho Chi Minh City, Hong Kong, Shanghai. So there are two different kind of periods that we have. Q1 was Middle East driven. Q2 is a little towards the East because of the off season markets.

33:55 But that's sequential. Y o Y could still be having a Middle East impact in Q2, right? I hope not. Like I said, we're already at 90% right now. I hope the crisis kind of tapers out. As far as capacity is concerned, we keep operating as long as it's safe to operate the maximum amount of capacity that we can throw into The Middle East. Got it. Thank you so much and all the best. Thank you. Your next question comes from the line of Aditya Mungya with Kotak Institutional Equities. Please go ahead. Yes. Thank you for the opportunity. A couple of questions from my side. The first one is on pricing. As I understand, the company isn't utilizing its entire fleet while price points are being up to about 20% and then higher levels in 2Q.

34:51 If there's some as is the case in 2Q, sorry, we had lost your audio. In the middle, Aditya, we couldn't hear you in the middle. Shall I go ahead with the question now? Yes. Just repeat because you got cut out in the middle, so we couldn't hear a part of your question. Just repeat, sir. We'll do so. So essentially, I'm just trying to get a sense on the pricing strategy, wherein today, there is an underutilized fleet, but price points are high. Is there something that could sustain even beyond Beyond Q2 is going to be the big Q3, which is usually the peak season for us. So we will be bringing back all the capacity that we have. And that was an approach that we had even last year. We had curtailed some of our capacity in Q2 because of the off season, and then we bring back the entire capacity that we have, along with dam leases. That was at least done last year. We'll again assess the demand supply situation, especially in the context of increased prices that we'll have to kind of play with given the cost levels are high. So again, something we'll obviously close the motor. We intend to bring more capacity back into the market because the demand is more likely than not to be very high, given that it's going to be a peak Q3 again.

36:23 Understood. The second question that I had in mind was more linked to new flows that are happening on the cross holding between airports and airlines being taken out as a provision. And then two parts to the question, a, how does INDIGO think about the threat of a new airline, let's say, airports competing with airlines with their own setup? And b, from a constructive perspective, is there a case wherein, let's say, INDIGO would want to partner up with their ports, the way it has happened globally and both of them then can end up benefiting? This is Rahul.

37:10 So we are reading this news as you are. All I can say is that if the news we may have if the news has any merit, one, it has no global precedents because it typically would reflect a massive conflict of interest. And over a period of time, it would actually be against the interest of consumers. This said, we should just watch the space and how it develops. The second part of your question is a moot point right now. Let's like I said, let's see how this whole thing develops and then we can take a considered view on how to approach things into the future. Thank you. I'll get back into queue. Thank you.

38:00 You. Your next question comes from the line of Prateek Kumar with Jefferies. Please go ahead. Yeah. Hi. Good evening, team. My first question is on cost, ex fuel exports, which increased 11% during the quarter. Like, I know it's because of lower utilization. Do you still maintain net to high single digit increase guided for this number? Also, can you quantify the deferred salary increment, which were not kind of accounted during this quarter? On the cost, cash ex fuel ex ForEx, it is going to be on the higher side of the single digit, even to the extent of probably on early double digit because that's what we are experiencing as far as the cost environment and given the lower utilization that has happened. So for the year, we are still going to be on the higher side of this single digit, possibly even lower end of the early double digit ranges.

39:06 The second part of the question, given the scenario and the environment that we are right now in, there was again a deferment related to increments that were to be given to senior management employees. So that's what we've been we'll assess again in six months' time where this needs to be what needs to be looked into given the environment that we are right now in. So there was a definite that we had done for all senior brand employees within the company as far as the annual increments were concerned. But the employee cost is still higher by 11% year on year. I mean, still, like, reasonably higher. So that excludes the management increment and maybe that'll be part of the cost in later part of the year, which also accounts for this stability of guidance that you're talking about.

40:00 Right. Okay. It factors in. It factors all that into account. That's right. But year over year increase is a combination of obviously increments that were that have been done to a certain portion of the team. It is also on account of gratuity. If you remember, we have taken some provisions that increased levels of gratuity, headcount increases and so on and so forth. So gratuity has a higher run rate now compared to what it was earlier. So we've taken an exceptional kind of cost for that in both Q3 as well as Q4. But the run rate has now started to increase because of that. My other question is on your capacity growth beyond FY 'twenty seven. I think you like doing analyst meet, you gave this capacity number of INR300 billion by FY 'fifteen that implied upwards of mid teens growth from FY 'twenty seven onwards or post FY 'twenty seven.

40:58 And you said in your opening remarks for like low double digit. Can you discuss this again? No. If we still hold to the mid teens, that is going to be from '27 to 2013. It's going to be early double digit to mid teens levels is what we still are holding to. Sure. Thank you. I'll get back with you. Thank you. The next question comes from Achal Kumar with HSBC. Please go ahead. Yeah. Hi. Thanks for taking my question. So my first question is on the yield versus the fuel and other cost pressure. So you mentioned that with such a high increase in the fuel, you were able to cover up with some part of it with the with the yield. Now you're guiding 20% yield increase.

41:54 So up until what level of fuel you can still cover up? Do you think you'll be able to cover the whole fuel price? Or is there any sort of that with this increase in the yield, you'll still be able to cover up, say, 120 a barrel or whatever. So with this cost of with this increase in cost also, so if you could give a bit of a color in terms of yield increase versus the cost increase, how should we think about that, please? If you look at just Q1, Achal, we basically had a yield growth of around more than 20%, 21%, but the cost increase were north of 30%. So that's where the pressure points comes in. When we look at Q2, there's been a moderation as far as capacity is concerned.

42:39 And we were pushing up the yields north of 25%. As we see the shift that has already started to happen on the fuel side again, because the fuel has tapered down significantly. Now we're seeing that the fuel is again, the cigarette has started to and Mopac has started to taper upwards as part of the cost. We'll again need to keep testing higher levels of use to offset that increased cost. Because beginning of the quarter when we were sitting, end of June, the board was coming to a close. Then suddenly, shift that has started to happen between in The Middle East has resulted in increased levels of fuel costs. So we'll have to keep testing higher levels of yields also just to offset the increased cost. This is a very dynamic situation. There's nothing that that is what we can state that this is it where we will increase the yield and then we'll have to probably be able to offset the cost. The cost levels themselves have started to increase again. So we'll have to test more higher levels of yields.

43:35 We'll see where this kind of settles depending on the developments that happened in Middle East. Okay. Fine. Fair enough. And my second question is around the sort of the fuel, you got some relaxing from the the ONCs in April, May. In between, there was a news that the company is asking airlines to compensate for that in case you don't sign up for the for the scheme. If that happens, have you paid as in how much extra burden will come to your P and L in case you need to compensate for the losses of once you made in April and May, please? No, not really because the way we look at it because when the fuel levels were higher on the international side, you had to pay market. On the domestic side, the cap that was applied enabled us then to define a fuel charge that was then passed on to the consumer.

44:32 So in effect, whatever was the increase, the 25 increase that happened, which was significantly lower than what the market was, and it was a kind of a good support that came from both the government as well as the oil marketing companies, was then passed down to the consumer also because our fuel charge did not go higher than what was the increased charge that was being passed to us. So in effect, it was a pass through that we enabled us to, a, keep the fuel the fare levels low and yet operate the scheduled operations that we had. Okay. And just to check, is Willy Watch joining the same August 1 as planned? Sorry, Pulkit, what was the question? Is Willy joining is Willy still joining on the August 1? Have you got all the approvals in place?

45:23 Yes. First week of August is when Willie is going to be joining the team. And also to just to answer the earlier question because we've kind of settled the period of April till June 8. Based on the bills that have been also raised by the all marketing companies on us as per the formula that will define the 25% cap. So we've kind of settled those bills based on what was the agreed position at that time. So you're not expecting any sub burden from April and May? Like I said, because we ourselves did not put any additional burden on the consumer. We in order to operate our plant fleet had the levels of fuel and the charges on us been to the extent of the market prices, we would have taken a different call. But given that support was coming through, we made sure that we passed it on to the consumer.

46:18 The next question comes from Kushagra Bhattar with CWC Advisors. Yeah. Hi. Thanks for the opportunity. Just just two questions. One, one short term and one longer term. The short term... Near term question is if you can give us some more sense on the RASK minus CASK or the next phase to call, let's say, for both, let's say, international and the domestic because the the environment has been challenging across, but the factors which played out are slightly different in the first quarter. And I'm assuming the competitive intensity is also quite different in both of these, which would have implications on the pricing or on the yield differently between these markets, right? So if you can help us understand how the next part evolved for both international and domestic in this quarter?

47:19 And then how do you expect it to play out, let's say, for the entire year? Is the gap sort of converging between the two markets? Or you're seeing those trends? That's the first question. I have a second question more on the longer term perspective. Honestly, I'll take the second question because we can't give you a guidance on this right now. You know how volatile the situation is. When we sat in March before the crisis, we were very optimistic in terms of this year is going to turn out better than the earlier two years, given the first year we had elections, then the following year, we had the Pelham. We were very, very bullish and optimistic related to how the year is going to turn out. Just the very first quarter itself has kind of turned on us, given the external factors, both the combination of the Middle East prices and the currency. So very difficult to give a spread number right now. So we are not giving any guidance on that.

48:16 Okay. No problem. The second question is more like on the industry structure, let's say, from the relatively new news, which has come out on the airport operators entering the airline sector. But apart from that... And the related question to that is if, you know, the challenges are different again for airlines because all of them are at different points of maturity with different balance sheets and different cost structures. So are you are you seeing or expecting a significant or some sort of a decent amount of industry structure change in industry structure shaping over the next twelve to fifteen months, weakening of some competition, which is where the motives behind this new news is... Could also be one of the factors. So if you can share some thoughts there, yes, that will be helpful. Because is this more like a better way where Indian airports can become global hubs?

49:18 Or this is more like how the current structure is, which is where the motors behind this new news is coming up? Anything we say is going to be in the speculative zone because like what's was shared, this is again news which is playing out. We'll see where this goes. The reality is whatever is beneficial for the consumer, there has been certain rules, regulations, which have always kept airport and airlines separate across the globe also. But we'll keep monitoring the space at risk. We'll see how we need to act and react whenever this comes as a formal kind of a communication. Rest is all speculation, right? All right. And just last one, if small one, if I can squeeze in, which is given the way, let's say, once the international normalizes, which is already 90%, and if you continue to take fresh clean, let's say, from second half onwards, do you expect the international ASK share guidance, which target, which you had shared earlier, kind of pre pawns and the international ASK share could sort of go much higher than what we had estimated probably by the end of this year. Yes, that's it.

50:32 No, we're still holding to that guidance. We had said 40% that we'll be there by 2030. We were well on track in terms of deliveries of our both the XLRs, which are largely for international markets as well as the wide bodies that will also start coming in. We are holding to that 40% guidance. And yes, the international side is going to grow faster because it has a lower base. And we had touched close to 33% of our capacity, which had gone to international. And by 2030, it's more likely than not, will be somewhere around 40% that we had guided earlier. Your next question comes from the line of Jinesh Joshi with Prabhutashi Ladir Capital. Sure, sir. Sir, my question is on the extent of FX loss that we have seen in this quarter, which is to the tune of about 82 crores.

51:27 And given the extent of rupee depreciation, this number appears to be slightly lower in the context of guidance that we had given earlier with respect to the kind of unit cost hit that we have from every rupee depreciation that we see versus dollar. So any reason for this number to be low? Has that expansion with respect to hedge cover increased? What is it? No. So you're probably referring to the mark to market. So the mark to market that shift was only PEDP quarter end March to June end. So it was good because at one time, it was trending significantly higher. So that 10 paisa translates into the INR 8,000,000,000, 9,000,000,000 that we typically have called out, which is our currency exposure that we have on a U. S. Dollar basis, that translates into this 80 crore. So it's largely because where the currency closed at, at a quarter point in June, which actually came out to be favorable because it was at one point very adverse, but strengthened during the quarter point of June. And as a result, it translates into an 80 crore, much lower than what we had experienced in the earlier quarters.

52:45 Got it. And secondly, on supplementary rental side, we have seen that cost increase to about 0.8 on a per year scale basis. Some of could be due to rupee depreciation. But is there anything specific that you would want to call out over share because the cost is up by about 11%. And this is one area where we have seen the surge be quite higher when I compare with the other cost. When you look at it from a sequential basis also, yes, there is because in quarter four, we had releases because we do a lot of as part of the supplementary rentals, we make provisions for redeliveries. When you redeliver, there is some leftover in terms of you don't spend as much. And as a result, those releases come through. So that's what happened in Q4.

53:39 As a result, what you get in Q1 is a more normalized kind of arrangement, which will play itself out every quarter. The increase in supplementary rentals, as you rightly mentioned, has been because of currency. These are all dollar denominated as well as the annual escalation that kicks in. But what you have in Q1 is a normalized kind of setup, which you'll see quarter over quarter now. Sure, sir. Thank you so much. Thank you. Thank you. The next question comes from Jaynam Shah with Equidia Securities Private Limited. Please go ahead. Yeah. Hi, sir. Thanks for the opportunity. Sir, just one question. What we have seen between FY '22 and '23, while our yield has increased around 1321% during that point in time due to various reasons, And then we have hold it up to those yields till now. And recently, we are now... The yields are now upwards of 6 rupees.

54:38 So can we expect that post the normalization of the fuel prices maybe after a quarter or two or so? Can we be able to hold on this thing? What your assessment says? Or will it be back to the normal given that the competition will be eventually playing out? What's your initial assessment, please? Kevin, it's a good observation because pre COVID to post COVID, there was a significant shift that happened on the yield levels. There was a 40% increase that happened. So post the crisis, there was obviously revenge travel, there was lower capacity that was available in the market that pushed up the prices. Subsequent to that, the growth has been largely volume driven. So a lot of capacity is what we were pumping in and pushing in, while keeping the yields relatively at those levels, which was then being absorbed by the market.

55:27 We are again experiencing a similar kind of shift where we are in a crisis in terms of the fuel elevated, the currency depreciation. These have elevated the cost level. We are testing new levels of pricing. As things moderate, because this is going to be a price led kind of a growth. As things moderate, we will look towards, again, bringing more volume. That's why the mid teen kind of growth post 'twenty seven. And we'll look to holding the prices because the cost basis themselves have also kind of increased, barring the fuel. The normal cost levels have also increased because of their natural inflation that is very much prevalent and the currency, which typically does depreciate every year on an average should depreciate. So the cost base continues to increase.

56:12 It's an opportunity right now for us to push prices to offset those cost basis. But even after the crisis is over and the fuel moderates, we're hopeful that we'll be able to then start driving volume driven growth where we are able to push more volumes so that more consumer can avail the services related to this. Got it, sir. Yes, that's it from my side. Thank you. Thanks. Thank you. The next question comes from Eamon Piranani with JPMorgan. Please go ahead. Yes. Hi. Thanks for the opportunity. Just one more question on fuel. Because, you know, the the oil marketing companies, the ATF prices that we used to track has become distorted because of the changes which have happened.

57:00 Just from a simple calculation point of view, given whatever fuel price you have seen in the June quarter, which was made up of the fuel cap and then the removal of the fuel cap and international being at market from the very beginning. And assuming that in 2Q, you are moving or you are continuing to be on market prices entirely, how should we think about the 2Q number versus the 1Q number based on whatever you can see in the market right now? Obviously, we still have two more months, but will it be higher? Will 2Q be higher than 1Q? Or will it be similar to 1Q, if you can give some broad directional sense? Wish I could do that. The forward curves related to fuel continue to keep changing.

57:50 So obviously, Q1 was significantly higher, the Brent also went up. If you look at Brent today, I'm using Brent, it's not the right reference point. But if you look at Brent, it's already north of 90% again. But what happened in Q1 was that the crack went up significantly higher. So while the Brent went up 50%, the cracks were going up even higher. We'll have to see whether demand supply equation works for turbine fuel, so aviation turbine fuel. Because that demand supply then defines what the crack levels and the pricing for MoPac is going to be. So if you look at the forwards, and we keep tracking the forwards on a regular basis, we've seen an uptick because no one can kind of crystal gaze in terms of where it's going to be. The best reference point is going to be where the forwards related to Mopac is or Synjet is moving.

58:46 We started to see an uptick. We were hoping when we started Q2, they were all moderating downwards. And that's one of the reasons no one signed up to the scheme because the levels had come down lower than the thresholds. But now we again started to see uptick. So it's anyone's guess, honestly, because the best reference point is going to be the forward that is available. So far, the forwards were lower than what Q1s were. And as a result, Q1 had to be better than what Q Q2, sorry, Q2 was supposed to be lower than Q1. But if the war kind of starts and whatever turn this particular thing takes and the August canal, etcetera, is kind of blocked, we may see similar levels of Q1.

59:32 Going in, we had anticipated Q2 is going to be better than Q1. Okay. Okay. But you are assuming Q2 to be better than Q1 because I understand that the forwards are coming down, but in Q1 for large part of the quarter for the domestic business, you also had a cap. Then shouldn't Q2 still have been higher than Q1 because the cap gets removed? I'm just trying to get that calculation correctly. The levels had come down below the cap levels is what I'm saying. So given the levels were coming down even below the cap levels is what I'm trying to say. Okay. Understood. Understood. Thank you. Sure. Thanks. Thank you. That would be our last question for today.

1:00:20 Ladies and gentlemen, on behalf of INDIGO, that concludes today's conference. Thank you all for joining us, and you may now disconnect your lines.