India's IndiGo says profit helped by Pratt, Airbus payouts

IndiGo is among several carriers facing delays in receiving planes from Airbus due to problems with new engines supplied by United Technologies’ Pratt & Whitney, which forced the airline to ground as many as nine planes.

The carrier has started receiving spare engines and now has no A320neo planes on the ground, InterGlobe President Aditya Ghosh said in a call with analysts after first quarter results.

Ghosh said he still expected it to take another 12 to 15 months before Pratt & Whitney resolved their issues and until then the airline would focus on getting spare engines.

InterGlobe warned in July that delays in deliveries of Airbus’ A320neo aircraft were affecting margins, adding it was having to lease planes to make up the shortfall.

The payment from Pratt & Whitney and Airbus includes compensation for lost revenue due to grounding planes and reimbursement of operational expenses due to aircraft delivery delays.

With spare engines coming in, IndiGo did not expect the same level of compensation to continue, Ghosh said.

InterGlobe’s net profit rose almost four-fold to 5.52 billion rupees ($85.26 million) in the quarter ended Sept. 30 while revenue from operations grew 27 percent to 52.91 billion rupees.

The firm said its revenue per available seat km - a measure of its operating earnings - rose about 13 percent to 3.52 rupees. Passenger yields, which measure the average fare paid per km per customer, climbed 9 percent.

IndiGo, which placed a provisional order for 50 ATR 72-600 aircraft from European turboprop maker ATR in May, expects to launch its first regional flight in December.

In a shift in its fleet acquisition strategy, the company said it would look at owning some planes, despite a new nationwide goods and services tax on the purchase of aircraft, while reducing the use of short-term sale and leasebacks.

InterGlobe planned to buy some ATR planes outright using internal funds and money recently raised from institutional investors, Ghosh said.

The company said its regional push comes despite Prime Minister Narendra Modi’s scheme to make it cheaper for people to fly within India. The scheme subsidises part of the cost for airlines to fly to smaller towns.

IndiGo expected the ATR fleet to make up about 5 percent of its total capacity over the next couple of years, Ghosh said.