InterGlobe Aviation (NSE:INDIGO) Q2 2027 Earnings Call

0:01 Evening, ladies and gentlemen, and welcome to INDIGO's conference call to discuss the Second Quarter of Fiscal Year FY twenty twenty seven Financial Results. My name is Neera, and I'll be your coordinator. At this time, the participants are in listen only mode. A question and answer session will follow today's management discussion. Should you need assistance during this conference call, Please note that this conference is being recorded. I would now like to turn the call over to your moderator, Ms. Rucha Chawra, Head of Investor Relations at INDIGO. Thank you, and over to you, ma'am.

0:49 Good evening, everyone, and thank you for joining us for the second quarter of fiscal year twenty twenty seven earnings call. We have with us our Chief Executive Officer, Billy Walsh and our Chief Financial Officer, Kiran, 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.

1:40 With this, let me hand over the call to Willy Walsh. Good evening, everyone, and thank you for joining us on this call. As this is my first earnings call as CEO of INDIGO, I thought I would start by sharing a few thoughts from my first few months with the business. As you know, I joined INDIGO just before the airline completed twenty years of operations, an important milestone and also a good time to reflect on how far the business has come. Now obviously, I knew INDIGO well before joining and had always respected what the airline had built. And my first few months inside the business have given me a much clearer view of what drives INDIGO's success: strong cost discipline, a relentless focus on operations and an experienced team that knows how to deliver at scale.

2:32 Now moving to the quarter, let me start with the operating environment. The global aviation industry continues to face uncertainty, particularly from geopolitical events, which are affecting travel patterns, operating costs and, in some cases, the way airlines operate their networks. And we monitor these developments closely, both from a commercial and operational standpoint, Where conditions affect our ability to operate safely, we review the risks and make the necessary adjustments to our network. Safety will always be our top priority. And at the same time, the industry continues to operate with fuel costs well above historical levels. Airlines across the world, including INDIGO, have responded through capacity and network adjustments and pricing actions, but cost pressures remain elevated.

3:25 Now moving to our financial performance. Our reported results were primarily shaped by two factors: first, exceptionally high fuel costs continued to weigh on our financial performance. And second, a seasonally soft period falling between the summer and festive travel peaks and includes the monsoon season. In response, we acted decisively to rationalize capacity across parts of our network. Our pricing actions and disciplined capacity deployment, together with a 5% reduction in industry seats, support a stronger revenue performance. However, due to the elevated cost environment, we reported a net loss of INR 19,000,000,000.

4:11 Our liquidity remains strong with free cash of around INR $399,000,000,000, and this positions us to navigate near term volatility while retaining the flexibility to invest in our long term growth priorities. And those plans are supported by the significant opportunity we see in India. The near term outlook may be challenging, but the foundations for long term growth remain strong. And I've spoken about the opportunity in India on many occasions, and I continue to believe that represents one of the most compelling aviation markets in the world. Continued investment in infrastructure, increasing connectivity and the growing importance of air travel within the broader economy provides a strong foundation for long term demand.

5:00 INDIGO's strong base puts us in a good position to capture this opportunity, and our priorities are clear: first, to continue building on the core strengths that have made India sorry, INDIGO's India's preferred airline and second, to maintain the operating cost discipline that has been fundamental to the company's success third, to be disciplined about where and how we grow with a clear focus on long term value creation and fourth, to build our international footprint in a measured way, taking advantage of the capabilities of the XLRs and the A350s while preserving the strengths of our low cost model. Alongside this growth, we are strengthening our relationship with customers through INDIGO blue chip.

5:49 The program completed two years in October and is approaching 20,000,000 members with more than 30 partners. So with that, let me hand over to Kieran, our new Chief Financial Officer, who will take you through the financial performance in more detail. Thank you, Willie, and good evening, everyone. I'd like to begin by putting the quarter's performance in context. As Willie mentioned, the September quarter, we delivered strong revenues in a seasonally soft quarter, amid significantly elevated fuel costs. While the reported results capture the combined effect of these factors, it's important to distinguish their near term impact from the underlying earnings strength of the business.

6:36 First, the fuel costs remain elevated. The benchmark Singapore Jet Fuel Index was 60% higher than Q2 last year. This increase, along with the rupee depreciation, flowed directly through to our cost base, a 69% increase in our fuel cost. Second, the quarter reflected a measured and disciplined approach to capacity in a period of seasonally softer demand. We've seen deployment across the industry approximately 5% lower year on year. If you recall, the industry capacity in Q2 last year also reflected seasonal adjustments. Third, in this environment, we delivered a 31% increase in PRASC, which exceeded our guidance of more than 25% growth.

7:22 While this represents strong revenue performance, it did not fully offset the abnormally elevated costs. Beyond ticket revenue, we are also strengthening ancillary revenues through a combination of broader range of customer choices, easier access to add on services across our digital channels and pricing. Our cargo business is also performing well, delivering strong revenue growth of 37% year on year growth during the quarter. Moving on to the headline numbers. We reported net income of INR $243,000,000,000, representing a growth of 24% year over year with a yield growth of over 34% and a two percentage point reduction in load factors.

8:12 In terms of profitability, EBITDA came in at INR 25,000,000,000 at a margin of around 11% compared to an EBITDA of INR 11,000,000,000 and a margin of 6% for the same period last year. On a like for like basis, excluding the impact of MTM and hedging, EBITDA margin declined by five percentage points, largely driven by fuel and cost escalations. For the quarter ended 09/30/2026, we reported a net loss of INR 19,000,000,000 compared to a loss of INR 26,000,000,000 in the same quarter last year. Excluding the MTM and hedging impact, we reported a net loss of around INR 7,000,000,000 compared to a net profit of around INR 1,000,000,000 in the same period last year.

9:05 Turning to our cost performance. CASK ex fuel ex ForEx MTM came in at INR 3.45 for the quarter, approximately 15% higher year on year. The increase was largely attributable to the following factors. The 9% depreciation of INR the past twelve months, which increased the rupee cost of our U. S. Dollar denominated expenses and capacity rationalization, which led to under absorption of fixed costs across the operating fleet and annual contractual escalations. In this volatile environment, we considered it economically prudent to conclude our wide body dam please operations with effect from November 1. We have derived useful long haul operating experience ahead of the arrival of our A350s.

9:57 Even as we respond to the near term operating environment, we continue to invest in our long term growth priorities. During the quarter, we announced Dar Es Salaam as our newest international destination with daily direct services from Mumbai beginning in November. The route expands our presence in Africa and further strengthens connectivity between India and key international markets. Moving to the fleet. We inducted a total of 22 aircraft from our original order book, all of which were inducted through our entity in Gift City. We redelivered 10 aircraft and two damplies aircraft during the quarter, resulting in a total closing fees of $4.42 aircraft at the quarter end.

10:45 Turning to the balance sheet. We continue to maintain a strong liquidity position, ending the quarter with total cash of INR $527,000,000,000, comprising free cash of INR $399,000,000,000 and restricted cash of INR 128,000,000,000. Moving to our outlook for the third quarter of this financial year. We expect capacity to grow in the early single digit year on The capacity outlook reflects the conclusion of our Damplase widebody operations, the prevailing geopolitical environment and our disciplined approach to capacity deployment. On the revenue side, the environment remains supportive with pricing continuing to reflect the higher cost backdrop and the base impact from last year.

11:34 Based on the trends observed in October, we expect CASK to grow by more than 25% year on year. For the full financial year, we expect capacity to grow in the early single digits. On the cost side, we expect CASK ex fuel ex ForEx MTM to increase in the high single digits to early double digits range, largely reflecting the impact of rupee depreciation in addition to the usual escalations. We remain mindful of the near term challenges posed by elevated costs and continued volatility. At the same time, pricing remains supportive and our liquidity position is strong. We will continue to act with discipline, carefully managing capacity, allocating capital prudently and protecting profitability while investing in opportunities that support sustainable long term growth.

12:29 With this, let me hand it back to Richa. Thank you, Willie and Kiran. Now 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're ready for the Q and A. Thank you very much. We will now begin the question and answer session. First question is from the line of Vinay Singh from Morgan Stanley. Please go ahead.

13:20 Hi, team. The company is managing quite well in a pretty tough environment. Just two questions, one on Prask and one on the white body announcement. On the Prask side, when we talk about 25% plus in Q3, which implies the usual sequential jump. How are the customers responding to it? How are the load factors when you look into the Diwali week and all? Could you share a little bit about load factor outlook, both on domestic and international? The second is on the white party exit that we'll do from November. What will be the impact of that on the spreads, RASK minus CASK? Is that a positive impact? Anything you could share on that? Okay. I'll comment first and if Kieran has anything to add. So we think load factors in the third quarter, and remember, it is seasonally stronger, will be flat during the quarter based on our current position and forward bookings that we're witnessing at the moment.

14:27 And in relation to the widebody, let me hand over to Kieran. Sorry, this is flat on a Y o Y basis or on a quarter flat on a Y o Y basis? Yes, flat on Y o Y. Yes. Great. Yes. On the wide body removal, we expect it to be accretive to spreads. This was always an investment case for us in the initial time period. And it was just a prudent economic decision in the current geopolitical situation of extremely high fuel costs and currency depreciation, we would expect an accretion to the spreads.

15:15 So any numbers on that? Will it be around 3% or so of your ESKM, so higher percentage of CASK? Is that the right way to see? So I don't think we give the exact figures, but just to remind you that in the second quarter, our domestic ASKs were broadly flat and our international ASKs were down about 2.9. So it's really looking at the international ASKs. But the decision to end at least was an easy decision given the high fuel price geopolitical issues impacting on the operation. As Kieran said in his opening remarks, we've learned a lot from the operation, which will stand us in good steps when we introduce the A350s in 2028.

16:10 Thank you. Next question is from the line of Arvind Sharma from Citi. Please go ahead. Hi. Good evening, Thanks for taking my question. This quarter you actually reported a fuel gas which was down quarter on quarter, a bit not so much but still down quarter on quarter. While you did highlight that prices have been going up, what was the driver behind the slight decline on a quarter on quarter basis in your task? That is my first question. Second question would be on the winter schedule. Long haul is down, as you rightly said, wide bodies are concluding. We also see more and more flights from the new airport, especially in Mumbai.

16:58 Does that help you? Or does that impact negatively the profitability? Those are two questions, sir. Yes, sure. Yes, why don't I address the question on fuel cost. As we indicated in the last quarter as well, the first quarter benefited from a 25% fuel cap that we had on domestic fuels, which the government had sort of provided support for the aviation industry. So that's come off effective June 8, right? So post that, our prices are linked to market prices. So that's the predominant driver for the difference that you see versus what you would expect.

17:48 Further, we've got a little bit of support from the government as well. There have been some VAT reductions for which we are thankful. So these would explain the movement in the fuel costs. And the new airports, is very important to us in the long term. These are clearly strategically critical to support the long term growth that we intend to pursue. So it's broadly some of the charges are slightly higher. But to be honest, this is an investment in the long term growth plans for the airline. So very pleased to have the opportunity to move some of our operations to Mumbai. I think that's going to help with our plans and enable the airports, Mumbai Airport to redevelop Terminal 1, which is clearly a bad need of redevelopment.

18:49 Got it, sir. So essentially, your task coming down is primarily because of government's carbon VAT reduction. Is that understanding correct on Yes. A quarter on quarter In the first quarter. The first quarter had a fuel cap that the government had instituted. So that supported the aviation industry by putting a cap on fuel prices to the extent of 25% over March prices. So we were buying all of us were buying fuel in April, May and up to June 8 on those cap prices. June 8 onwards, they come off. So June to now, we've been buying at market prices. But they are still low quarter on quarter. 2Q is below first quarter, the fuel CASK.

19:39 Correct. SyncJet has come down. What we are trying to say is the SyncJet in first quarter was higher than the government prices on an overall basis, right? So that's why you would have a sort of price and there was also volatility within the month. So if you remember in July, the prices would come down more significantly. So there is a little bit of volatility impact over there as well. And one clarification on your guidance. The 3% ASK growth in the third quarter, are the cuts more in domestic or international operations? It will be more international in the third quarter. As you know, the third quarter is very strong in the Indian domestic market given the festive season.

20:34 Thank you. I request all the participants. Please limit yourself to two questions per participant and Regent for a follow-up. Next question is from the line of Gurupashankar from Aventas. Please go ahead. Good evening, and thank you for the opportunity. My first question is for Willy. Just a strategic question. You know, given that you've built a lot of full service carriers, and And I wanted to understand how do you see INDIGO balancing its low cost core with its wide body and long haul ambitions? Yes. I don't really see it as being a particular challenge. I think where airlines have maybe got it wrong before is that they've accepted a compromise on their short haul operation given the expected contribution that short haul FEED makes to long haul. We're not going to make that mistake. And given the very significant short haul network that we have in the Indian domestic market, I don't see any need for us to compromise on our short haul model to facilitate feed into the long haul. So we're very clear. We have a very low cost base today.

21:51 That's going to give us the opportunity to expand into long haul off that low base. And we're not going to allow people internally to be distracted by the introduction into service of the wide body. And the simple outlook for India, I think, is very, very strong. I've been commenting on this last year, 78,000,000 international passengers in India. Heathrow at 79,000,000. So you have one airport in Europe with more international passengers than the country here. So I think the long term opportunity is very significant, and we want to participate in that. But we will remain absolutely laser focused on our short haul, low cost operation and will not be distracted by anything that we need to do on the long haul introduction.

22:46 Got it. The second question was lastly on recent news that government is planning to use strong reverse to prevent sharp surges. And do you see any impact of this decision on peak season pricing and the overall pre market pricing for the airline? No, we don't see that at this stage. I think if there is a price stabilization fund that makes sense for us to participate in, then we'll clearly look to do that. But we wouldn't do anything that would artificially impact on taking the right decisions given the high fuel prices that we're encountering today. So if it makes sense, we will participate. And I give credit to the government for looking at an innovative way of trying to moderate the increase in the fuel price.

23:50 But clearly, the terms of that will be the important issue for us. The line for the participant, Rob. Next question is from the line of Fabri Hazarika from MK Global. Please go ahead. Yes. Good evening. So first question is, so how do you see the elasticity of demand right now in terms of given the increase in fare and increase in cost? So are you seeing some sort of like stimulation? How do you see it? Yes. I think it's a bit early to call that on the basis of one quarter, which is traditionally soft in India.

24:36 I've been very encouraged by what we've seen in the quarter and encouraged by what we're looking at going into Q3 and also encouraged by what other airlines are seeing across the world. So this situation isn't unique to us. I suppose what has hit us a bit harder than particularly The U. S. Carriers who are also unhedged has been our depreciation of the rupee against the dollar. But when we look at the actions that airlines are taking, I think we're all taking similar action. I think we're looking at that balance between yields management and load factor to ensure that we're maximizing the revenue generation for the airline.

25:23 But demand has held up pretty well. And obviously, we're going into a much stronger quarter with Q3 and haven't seen anything in the figures to date that would suggest there's an issue there. Got it. And second small question, any reason why other expenses have fallen sequentially? I think there was there is a little bit of accounting grouping play over here to the tune of about INR 178 odd crores. There is a little bit of a classification issue, which makes it on a full 1H basis squared up.

26:18 So that's what sort of what's causing it. There is a little bit of offset of that because of airport handling costs, which have increased primarily due to higher international departures in the second quarter. I mean, if you want the details of this, you can... No, it's fine. It's fine, yes. You so much and wishing the new team all the best. Thank you. Thank you. Next question is from the line of Prateek Kumar from Jefferies India. Please go ahead. Yes. Hi, good evening. I have a couple of questions. Firstly, on your cash ex fuel x or x guidance of high single to low double digit.

27:08 Your first half numbers for this is, around 1313%, which is, I guess, higher than low double digit. So we are looking at, like, sharp moderation on year on year basis in the second half, or should we, like, work with higher... I mean, a 12% kind of number only for full year? So the primary reason for a higher second quarter would be like we've been talking about having a disciplined approach to capacity. And as we mentioned, we are looking at capacity increases to come up in the second half. So the utilization will catch up is what we're expecting. And that's why we're calling a late single digit, early double digit on an overall year basis.

28:04 Okay. So it can still probably end at a midpoint at, let's say, 10%, which implies around only 7%, 8% year on year growth for second half versus 13% in first half. That's right. Yeah. Okay. And the other international exit from my body could also be contributing to this assumption I would agree. I mean... Other question... Our stock decline or conclusion of the international operations with North would be added. The question is on your, like, this exit of... From wide body international.

28:53 Does this impact the preparedness for, like, when when you start, like, launching XLRs, like, because you lose... I don't know if you lose the lending slot or Heathrow slot or some other slots. Yep. Another related question is like are you also reviewing your aircraft delivery schedule with Airbus? So the exit doesn't have any impact. We're using the XLR to maintain the slot at Amsterdam. So there's no longer term impact as a result of the termination of the Norris wet lease. So it won't impact in any way on our plans going forward. Sorry, you had another question?

29:44 Are you reviewing the fleet? Yes. No, no, we're not reviewing the fleet. Obviously, like every airline, there are some delays to the delivery schedules from Airbus. But no, it's we're still committed to the fleet orders that we have and looking forward to taking delivery in 2028 of the A350s. Next Next question is from the line of from UBS Securities. Please go ahead.

30:30 Yeah. Thanks a lot for the opportunity, and welcome the top admins to the new role, and wish all the best for the future. My question is, Billy, regarding the capacity reduction what we've seen in 2Q. And given that we continue to add aircrafts quite aggressively, what is the framework you're using that which decides how do you add back capacity over the next few quarters? Is there a particular fuel yield of margin threshold? I just want to understand what the framework which will guide you. Yes. Obviously, we've got a very strong team who will look very carefully and take a prudent approach to the addition of any capacity. So we'll clearly do a detailed network analysis. So it's really on a flight by flight basis that we're looking at capacity.

31:22 And I think the measures we took in Q2 were proven to be or have proven to be absolutely right. We'll continue to apply that discipline as we go forward. But we do see much stronger demand in the third quarter to the seasonally soft second quarter that we've just come out of. So is there any particular numbers you got track internally which will guide the expansion? And also related to that, could this also affect our FY the next fiscal growth plans as well, the exceptionally high fuel prices, if they don't kind of normalize very soon? To be honest, I have no idea where the fuel price is going to be in a couple of months, never mind next year.

32:13 What I can tell you is, historically, as you know, the industry tends to adapt to the fuel price. So if it the fuel price moves to a structurally higher level. And I think for jet fuel, it's particularly in relation to the crack spreads. We've seen crude prices moderate a little. They're in or around 110,115, but it's the crack spread that has been significantly elevated. And I think some of that is down to the disruption in refining capacity, which should be corrected over time. So historically, the crack spread has been around 20%, a little over 20%. This year, we're seeing it this year for the average around 60%, 65%.

33:00 So while we would expect maybe to see some elevated crack spread, I don't think we'll expect to see it at such high levels going. But whatever the fuel price will be, the industry traditionally adapts to that change in the fuel price because it's such a key element of the overall cost base of the industry. Thank you. Next question is from the line of Janesh Joshi from PL Capital. Please go ahead. Yes. Thanks for the opportunity. Sir, I have a question, which does not necessarily pertain to this quarter, but with respect to the ESG guidance of $100,000,000,000 by FY 'thirty that we gave some time ago.

33:55 Now given our 1H performance and the guidance that we have given for 3Q that is in early single digit, perhaps we may end the year with an ASK of say about 178,000,000,000 to 180,000,000,000. And from that base, if we have to reach 300,000,000,000 by FY 'thirty, the the essential CAGR that we have to deliver has to be in the band of about 18, 19%. So just wanted to know what are the key drivers of growth here given the fact that in domestic markets, we have peaked out in terms of market share. And again, on the international side, given the current scenario where we are kind of slowing down a bit.

34:41 So how think of the growth lever with respect to achieving the long term guidance that we gave? Yes. Look, there's a lot of moving parts. But at this stage, I'm happy to stick to the long term guidance. I don't see any change in our long term approach to the business. We're starting with a very strong foundation. We're uniquely positioned in having fleets and aircraft deliveries that are well positioned over the next few years. That gives us the opportunities to grow. There are lots of markets that we're not participating in today that we can't participate and where we see significant growth. So we're all the time looking not just at the domestic market, which is clearly important for us, but also our ability to expand into international markets. And I mentioned about the industry adapting to fuel prices.

35:43 I think the industry also adapts very well to geopolitical issues. So we find our way around these issues. It may take a little bit of time. We may have to incur some short term challenges and some short term noise, but the long term remains very positive in terms of the outlook for India. And I've seen nothing in my short time here and my knowledge of the industry, I've seen nothing that would cause me to say that those long term targets are not achievable. Sure. And sir, one last question from my side. I think this was asked earlier in the call as well, but just wanted some clarity on this bit with respect to the load factor and yield movement that we have seen in 1Q and 2Q. So for example, in this quarter, our load factor was down by about two twenty basis points, while the yield was up by about 34%.

36:49 Even in 1Q, we saw a similar environment, wherein yield jump was quite high, and we saw a 130 basis points decline in the load factor. So just wanted to kind of get some sense on this. Is it kind of fair to assume that the current repricing that we are seeing due to inflation that is having an impact on demand as evidenced by the declining load factor. The moment the crude settles, we may revert back to our original pricing in terms of yield. So your thoughts on that? Well, the critical issue is the revenue. And that, obviously, as you know, is a combination of both the yield and the load factor. And we look at the trade off all the time and not just across the network, but we'll take a view on every sort of part of the network that we're operating on.

37:45 I'll give you one example. We see opportunities to generate additional revenues through the premium product that we've introduced. Now in the second quarter, it's small. We'll be growing on this. That's something that we've not seen historically. But I think the early indications of the performance of the stretch products, which I think is excellent, gives us reasons to be optimistic there. So that's going to be a feature of the business going forward. And obviously, the other thing we need to look at is our ability to generate ancillary revenues. So it's not just a focus on the fare, it's on the total revenues that we can generate. And we believe that there's scope for us to increase our average ancillary revenue per passenger as well as we go forward.

38:38 The next question is from the line of Ankur Pairwal from Access Capital Limited. Yeah. Hi, sir. Thanks for the opportunity. First question on your thoughts on ASK growth for financial year 'twenty eight, given that the aircraft deliveries have been slightly back ended. And I'm combining the international expansion here, given that most of the incremental supplies were supposed to be absorbed in international. Given the fuel volatility, is there a possibility that ASK growth could be slightly back ended even next year, given the fuel led volatility and the macro?

39:25 We keep all of this under review, and I think we've demonstrated our flexibility during the second quarter and also our ability to move quickly to respond to any opportunities or challenges we see. So right now, we're not changing the financial year 'twenty eight growth guidance of mid teens, but clearly, we'll keep that under review. The aircraft deliveries are coming. There may be some short term delays to some aircraft given some of the issues we see with the OEMs. But we're looking at more than one per week. So we can and we have plays with utilization as we've gone through this year, and we'll continue to look at that. So all of our decisions will be taken to ensure that we take a prudent approach to the growth that we're adding to the network.

40:26 Sure, really. And just one follow-up there on the nonfuel CASK inflation. This year, we are expecting high single digit, low double digit. But what should be a steady state number here, let's say, 'twenty eight onwards? So like I mentioned before, we're talking about early double digit or late single digit. It's a combination of two things. It's a combination of all currency depreciation, which is very, very sharp this year. And then there is the regular inflation, which you have seen over the last many years, which is in early single digits or in that range. So that will sort of continue.

41:23 Okay. Sure. Thank you. Yes. So my question was more on FY 'twenty eight, while I appreciate your comment on the current year inflation, but more on a steady state basis, 'twenty eight. So INR depreciation may be, but yes, structurally. Yes, if you back that out, it's a mid single digit range is increasing, right? Okay. Sure. That's helpful. Thank you and all the best. Thank you. Thank you. Next question is from the line of Joseph George from IFL Capital Services. Please go ahead. Thank you for the opportunity. The question that I had was, no, when you look at the pricing lever that we have exercised this quarter and projected into 3Q, it's pretty significant, right? We're talking about 30 kind of an increase in heap, even though it's at a small cost in terms of volumes. Now theoretically, if crude were to fall back, let's say, 60 or $70 the scope for improvement in profitability is immense, that is, you maintain current pricing. So in that kind of a situation, what is the guiding factor you would look at maybe in terms of sustainable spreads that you would like to operate?

42:37 Well, first thing I'd say is it's not the crude price that's going to really impact us because as we've said, jet and crude have somewhat verged. We're not seeing the same movement in jet as we see in crude, principally because we've seen widening crack spreads. So we clearly have to be much more focused on the jet fuel price rather than the crude price. Yes, I think if crude price comes down, that will probably play into lower general inflation, which would be a positive given the impact that inflation would have on disposable income. So I'd say that is a positive for us. So we'll continue to monitor the fuel price and take pricing action that we think is appropriate in the environment in which we're operating.

43:29 And obviously, we'll be looking at what other airlines do around the world because I think we're all responding in pretty similar ways. So going forward, we see opportunities, as I mentioned earlier, to grow revenue contribution of the premium products and opportunities to grow the contribution that we get from ancillary. And the other thing we've seen in the second quarter, which I think will continue in the third quarter, has been strong cargo performance. Now obviously, with the departure of the 787s, that will impact on the cargo that we can carry on long haul, but the underlying trends in cargo have been encouraging as well. Sure. Just one follow-up on the ATF bid.

44:20 So if I look at the average ATF in 2Q, could you guide us on where that number would be compared to 2Q as things stands today, maybe the average for October, some guidance there based on the crude and jet fuel? Look, I think this will move in line with the benchmark indexes like Synjet and currency changes, right? So that would be the guidance. Obviously, we cannot talk to specific terms with purchase prices and things like that. But largely, the differential would follow the Synjet benchmarks.

45:08 Sure. Okay. Thank you. Thank you. Next question is from the line of Achal Kumar from HSBC. Please go ahead. Yes. Hi. Thanks for taking my question. First of all, I wanted to understand a bit more about the domestic market. You mentioned the demand is very strong in the domestic market. Then obviously, you have a Tier one, Tier two, Tier three cities. Tier one is more have strong penetration from the cargo sorry, from the corporate, which are least price sensitive. But Tier two, Tier three is actually more leisure, where INDIGO has a very strong presence as compared to your peers. So now with the higher fare, of course, Tier one will still continue to sort of travel and you'll see more demand strength.

45:58 But how do you see Tier two, Tier three? And have you done or are you thinking about doing any sort of network restructuring within the domestic market? Any color on that, please. Yes. So I don't see any need to do any major restructuring on the domestic market. But you've highlighted our approach to reviewing our capacity. Obviously, we'll if we see any softness in certain areas, we can adjust capacity there. And that's pretty much the approach we took during the second quarter, and we'll continue to do that. So we'll be very agile in terms of how we manage our capacity. And we'll make corresponding adjustments, both positive and negative, depending on where we see the demand. And I think that's one of our strengths. We're able to respond very quickly, and I think the measures we took in the second quarter had a positive impact on the overall financial performance of the business.

46:54 And we'll continue to do that as we go through the third quarter and fourth quarter as well. Right. And then I have a follow-up on the products different products which INDIGO launched recently, including your loyalty, including your business class, including ancillaries. So how has been the performance? Of course, the business class has not been performing so well, your stress product on some of the routes. Interaction was doing great. So now can you please give a bit of a color in terms of how these products are doing? And what kind of potential upside do you see, especially in ancillary, the land where you are coming from really has a very strong ancillary revenue. But in India, I think there are some government restrictions. So there are some limitations where they can reach. So can you please give a bit of a color on all that, please?

47:43 Yes. No, you're right. Like the European environment, if you look at Ryanair's ancillaries, I think they're about five, 6x the average ancillary revenues per passenger that we generate. And much of that is because of the mostly offered as part of the fare in India compared to Europe. But we have seen growth in the per passenger ancillary during the second quarter, went up from about $5.25 to INR $5.90, which is encouraging. And I think there's still scope for further development in that. And obviously, we're only scratching the surface of the contribution that loyalty can make. Now it will take us a bit of time.

48:29 But when you consider the number of members that we have now coming up close to 20,000,000, the ability to generate additional revenues through a structured program there. And we've brought in a new leadership there, very encouraged by the early developments. And then if I look at the premium, the stretch product, it's actually very encouraging. I think we've probably been a bit shy about promoting the project in the premium market. I think it's an excellent project. More and more people are getting to know about us. People are very encouraged when they experience it. The research we've done is encouraging. And the figures on international are very positive as well. So without question, there's scope for growth in those three segments: premium, ancillary revenues per passenger and in the longer term, loyalty.

49:39 Next question is from the line of Aditya Mungya from Kodak Institutional Equities. My first question was especially on the interplay between pricing strategy and your capacity as in the context of that some of The U. S. Majors have started talking about kind of ensuring that their capacity planning depends on where crude is with the end game of maintaining price points in the market from where they are today. You talked about near term following this kind of strategy over the next month to quarter. But thinking about FY 'twenty eight, what are your thoughts on kind of continuing to kind of tinker with capacity addition so that the pricing in the market remains pretty much where it is at this point of I've heard some CEOs say they're going to keep the prices where they are even if the fuel price falls.

50:42 Nice thing to say. I think it's going to be challenging to implement. I've heard CEOs say that before. My experience is there's almost a direct correlation between the fuel price and ticket prices. As fuel prices go up, ticket prices go up. As fuel prices come down, ticket prices come down. Not exactly in line, but there is a correlation there, and I would expect to see that continue. I think what we've seen so far this year has been very encouraging. We are going to continue to be prudent. We look at the reaction to the markets when we do make adjustments to the pricing, be that in the price or in the fuel surcharge.

51:30 But the bottom line, and we've been saying this very publicly, there's no way you can avoid increases in fares when you see such significant increases in the fuel price. It's inevitable that the fuel price will ultimately get passed through to consumers. And that's the reality of the industry. So the response that you should expect to see will be similar to everybody participating in the industry because everybody has ultimately has to pay the same price for fuel. And even if you look at the airlines in Europe that are hedged, their hedging will start expiring. So while maybe European consumers have not seen the same degree of fare increases in the short haul, you've heard Michael O'Leary talk about unprecedented increases in fares next year.

52:22 And what that reflects is the fact that the fuel hedges that the likes of Ryanair, EasyJet and Wizz have in place will start unwinding. Got that. Second question, the final question from my side. Again, wanted to get your views on this aspect. There have been talks of airports being allowed to to be owning airlines in the country. I wanted to get a sense that if this was to become an eventuality, how do you think through the risk that emanate INDIGO in the very near term and then maybe over the medium term as well? No. I think the issue there is there's a clear concept of interest in terms of an airport that owns an airline and slot distribution.

53:14 And I would expect regulators to look very closely at those. This is a brutally competitive industry. And we've got a lot of experienced airline people who are doing a great job of running airlines that are very efficient and not making money. And if airports want to do that, they want to lose money, I'd suggest they reduce their prices actually. Maybe that would be easier They if want to give money away. Why don't they give it to the customers that are using their airports at the moment rather than do something that's not necessary. Thank you. Next question is from the line of Kushagar Bhattar from CWC Advisors. Please go ahead.

54:02 Yeah. Hi. Thanks for the opportunity, and welcome to the new management. Strong show on the pricing. Just two questions. One is if you can give some more color on, let's say, how many of your bookings came from the blue chip members? And a related thing would be, let's see if you can give us some more sense as to... The base has already reached to 20,000,000, but let's say the top 2,000,000 unique customers would be contributing meaningfully given they would be high frequency customers, right? So a color on that will be really helpful. And I have a second follow-up question as well. Yes. It's still very early days. And I think some of our early figures may not give you an accurate assessment of where we see the long term value.

54:55 So I know from my previous roles that this can be a very significant contributor to revenue. And what you tend to find is active members tend to book and generate revenue that are multiples of what the sort of casual engaged customers are. So I think it would be too early for me to give you any figures that would be meaningful. But we do have, as I said, around 20,000,000. The challenge or the opportunity, actually, it's not a challenge. The opportunity is to turn those members into active members and to develop a scheme that's attractive for them and encourages them to fly with us, to earn points with us and to redeem those points with us and with our partners.

55:47 And we're going to follow the same business model that has been so successful with other airlines, including my experience at IAG through AVEOS. So we'll certainly give you a lot more information on this as we go forward, but it's very early now. Sure, Gilly. Our second question would be on if you can give more color on the pricing and the utilization. So you gave a lot of color, but let's say if you can give us more sense on how the pricing and utilization trended out in the domestic market between the three segments, which you generally call out on your Investor Day, right, metro to metro, metro to non metro, between, let's say, non metro to non metro, like, where the revenue maximization worked out best for you versus your own expectations between these three subsegments will be really helpful. And a related question would be how much of the yield increase would have come from increasing share of the premium products, right, would be really helpful. Yes, that's it from my side. Andrew and all the best, guys.

56:55 Yes. No, on the second one, it wasn't meaningful. What I'm talking about in the premium project is where we see the contribution going forward. And that's why you may have seen we had an advertising campaign around Stretch. Think it started last week and it finishes up. But that's why we're encouraged by what we're seeing there. And actually, the experience was pretty consistent right across the network during the second quarter. So we'll keep that under review. But it was encouraging what we saw, and it was pretty consistent on the three segments that you've called Ladies and gentlemen, we'll take that as the last question.

57:50 On behalf of INDIGO, that concludes today's conference. Thank you all for joining us, and you may now disconnect your lines. Thank you.