Yes, this is just one side of a story.
Yes, such serious stories arrive once in a year where Indigo flies thousands of times.
No, this won’t make Indigo a bad company or investment, but its good to be aware.
Disc. Not invested, but invested in Bajaj Fin. which has got bad reps for spamming & harassing. But, I believe that Image is important for any company to thrive!
This chart shows how important ATF prices are to industry profits.
The throughput charge now removed by Govt will be extremely beneficial to the industry.
Fuel throughput charges were ~2 rs/litre
They constitute about 3% of ATF prices
An estimated postive impact of 700-900cr /annum on industry which indigo has a 48% market share of.
just did some work on various costs involved in a typical flight
The main costs and its calculations are as follows
Fuel rate per litre has been considered as Rs 63 for ATF as per last published prices
Component C in my deck has been calculated based on Annual Report.
I have removed all costs relating to Fuel and Airports and then divided the charges by No of passengers carried by Indigo during the year.
You have not considered fuel consumed by an aircraft on ground from the time it lands and takes off again. It’s not very significant but for calculation purpose you can add 300kgs more for each flight, it varies more
for a congested airport to a smaller airport.
Similarly if NEO is flying on a similar route, fuel consumption for one hour flying time is approx 2000kgs.
Investor presentation:https://www.bseindia.com/xml-data/corpfiling/AttachLive/a4366f20-46cc-49ca-9457-0535b0feb3c9.pdf
High drama at IndiGo EGM as shareholders question Gangwal’s absence https://www.livemint.com/companies/news/high-drama-at-indigo-egm-as-shareholders-question-gangwal-s-absence-11580282671062.html
Q3 Results
The Securities and Exchange Board of India (SEBI) has in its preliminary enquiry (PE) found several related-party transactions (RPTs) between InterGlobe Enterprises and IndiGo that were not disclosed as per required procedure, ac to moneycontrol.
This article came after Gangwal’s allegation. So the possibility just increased of it being new RPG transactions.
On updating the matter is now with another department with SEBI that’ll decide if it’ll go with Forensic Audit or IBA route.
In my understanding, it looks like they have to be newer and not complied with to raise an audit route. EY cleared it of a forensic audit prior to August 2019. Value of transactions is unknown. Indigo has initally denied this communication.
The company has neither denied the RPT transactions nor that they were not disclosed to the board, but they stated that form a small part of the turnover. The issue here is of ethics of the management and effectiveness of audit committee.
The management had been found to be greedy and less investor friendly since the time of IPO as during the IPO too, they had rewarded promotor’s with huge dividends to the extent that at the time of IPO, the reserve had become negative for a short period.
Reduction in fuel price was supposed to bring back good luck for Indian airlines. But with the global spread of Corona virus, airlines are being forced to rejig their network, cut flights and delay launches.
International passenger traffic growth in the Indian aviation industry could see an impact of 19.5 to 23.8%.international traffic growth for the first 9 months of 2020 have witnessed a decline of 8.4%.
Indio is planning to cut the number of flights to Saudi Arabia and West Asian countries due to virus. Due to Saudi Arabia ban on religious tours, indigo executive said they were exploring where the capacity from the kingdom can be diverted. Saudi Arabia is the second largest aid travel market for Indians in West Asia after United Arab Emirates and around 5.9 million passengers flew between the nations in 2019.
Indigo is likely to cut a flight per day to rationalize capacity. There are enough places in the domestic routes where the capacity can be redeployed as per executives.
Src: Business Std
The reduction in fuel prices is not lower than last year prices for the same timeline.
| Month | Delhi | Kolkata | Mumbai | Chennai | Month | Passenger | Y-o-Y | ||
|---|---|---|---|---|---|---|---|---|---|
| February-20 | 63,450 | 68,487 | 62,950 | 65,491 | February-20 | ||||
| January-20 | 64,324 | 70,589 | 64,530 | 65,620 | January-20 | 128 | 2.3% | ||
| December-19 | 62,687 | 68,813 | 62,879 | 63,830 | December-19 | 130.17 | 3% | ||
| November-19 | 62,673 | 68,771 | 62,865 | 63,758 | November-19 | 129.48 | 11% | ||
| October-19 | 64,910 | 70,790 | 64,863 | 65,833 | October-19 | 123.15 | 4% | ||
| September-19 | 62,699 | 68,667 | 62,712 | 63,642 | September-19 | 115.33 | 1% | ||
| August-19 | 63,295 | 69,209 | 63,295 | 64,215 | August-19 | 117.94 | 4% | ||
| July-19 | 61,200 | 67,154 | 61,200 | 62,175 | July-19 | 118.84 | 3% | ||
| June-19 | 65,007 | 70,421 | 64,946 | 66,070 | June-19 | 120.46 | 6% | ||
| May-19 | 65,068 | 70,727 | 65,029 | 66,299 | May-19 | 121.87 | 3% | ||
| April-19 | 63,472 | 69,242 | 63,448 | 64,713 | April-19 | 109.94 | -5% | ||
| March-19 | 62,795 | 68,523 | 62,749 | 64,000 | March-19 | 70.97 | -35% | ||
| February-19 | 58,061 | 63,598 | 58,017 | 58,988 | February-19 | 158.48 | 38% | ||
| January-19 | 58,061 | 63,556 | 58,017 | 59,021 | January-19 | 125.08 | 9% |
The prices are actually higher than the 59000 average for March Quarter.
Passenger growth for the month of January is also lackluster which is usually considered a good month. However it’l’ be February passenger growth numbers which is needed to be monitored.
Regards
Disclosure: In the last month, gradually sold off my position.
ATF rates have gone down ~10% effective 01-Mar-2020.
Look at March passenger numbers, vs January and february, and see how much of the ATF cut will be translated.
February passenger numbers are not out yet.
“Airfares are falling in line with oil prices which continues to drop. Airlines are also refraining from increasing prices at the moment as they expect weakening of demand on the domestic side. Few domestic carriers are also waiving change and cancellation fees for immediate travel due to virus outbreak. While overall last minute fares on popular domestic routes have decreased 20-25 per cent, variable spot fares of certain routes have seen an increase due to holiday travel on occasion of Holi,”
Fuel accounts for over 30 per cent of an airline’s operating expense and a low fuel environment will however help Indian carriers
“using indigo to hedge my portfolio against possibility of corona outbreak in india.”
How buying Indigo is a hedge against outbreak?
