Airlines all over the world are trying to adapt to the everchanging environment. It is not an easy task as the coronavirus pandemic disrupted the industry, as can be seen from the example of one of India’s largest carriers. As of August 21, IndiGo was flying at about 32% of its capacity. This fact once more underlines the severity of the problem. It is worth mentioning that, IndiGo does not expect to be profitable in the next 18 months.
People should take into account that, Indian low-cost carrier IndiGo operates a fleet that consists of 274 aircraft as of June. Moreover, the carrier also operates international flights. It offers flights to various destinations.
It will be quite hard to generate profit at these low amounts of flights. However, the company plans to use 75% of its capacity by early 2021. As a result, after reaching this number, it will be easier to generate profit. At the moment, the company’s main goal is to reach positive cash flow.
Based on the information provided by the company, it will raise up to 40 billion rupees ($534 million) in funds through a qualified institutions placement. As a reminder, a qualified institutions placement allows publicly listed firms in India to raise funds from accredited investors by issuing shares without undergoing a lengthy regulatory process.
India and the local aviation industry
India is the second-most populous country in the world after China. It means the country has a huge potential when it comes to attracting passengers. However, Indians mostly travel out of state by train, which can take days to reach their destinations.
Low-cost carriers such as IndiGo and others have the opportunity to benefit from this situation, by selling cheap tickets. As a result, people will be able to reach their destinations in several hours instead.
The coronavirus pandemic created a lot of problems for the industry. For example, airlines responded by suspending flight routes. Moreover, some of them made the decision to reduce the number of employees as well as getting rid of some of the airplanes.
InterGlobe Aviation operates IndiGo. Interestingly, in the second quarter of this year, InterGlobe Aviation reported a pre-tax loss of 28.42 billion rupees ($379 million). For example, during the same period of time in 2019, the company reported a profit of more than 15 billion rupees.
It is worth noting that revenue fell more than 91% for the quarter after flights were grounded for almost two months due to a national lockdown.
One of India’s largest carriers decided to reduce the number of employees by 10%. Hopefully, the company has no intention to increase this number. However, that could change if business conditions further deteriorate due to the coronavirus pandemic.
At the moment, India has the highest number of cases in the world, with more than 3 million cases. Consequently, it is hard to determine how long it will take to deal with the coronavirus pandemic. It will take time to return to pre-COVID 19 levels, not only for IndiGo but for other carriers as well.