IndiGo’s aircraft groundings on downward trajectory, likely to fall to mid-40s by early FY26 | Business News
India’s largest airline IndiGo has started to see a reduction in the number of aircraft grounded due to engine issues, and the carrier expects to see a progressive decline in these numbers over the coming months, its top executives said Friday. This is the first instance since late last year of the airline reporting a reduction in grounded aircraft. Going forward, as the situation improves, the impact of the groundings and associated costs on the airline’s financial performance is expected to moderate.
“We have turned the corner as the number of grounded aircraft and associated costs have started reducing,” the carrier’s chief executive officer Pieter Elbers said in an investor call that followed the company’s earnings for the September quarter.
Until recently, IndiGo had over 70 aircraft grounded, mainly due to troubles with Pratt & Whitney (P&W) engines. The number had hit a peak level of “mid-seventies” in the July-September quarter. It has now reduced to “high-sixties” and is expected to fall further to less than 60 by the end of this year, and then to “mid-forties” by the beginning of the next financial year, the airline’s chief financial officer Gaurav Negi said. As of September 30, IndiGo had a fleet of 410 aircraft, the largest in India.
As more of IndiGo’s grounded aircraft return to service, the airline is expected to be able to gradually wean off the mitigating measures it had to take, which included taking more planes on damp and secondary leases, extending existing aircraft leases, and retaining older planes that were set to exit the fleet, all of which are additional costs and have been impacting the company’s financial performance.
“What we are expecting now is that this number (of grounded aircraft) will start to trend further down and be in the mid-forties by the start of the next financial year, and over a period, it will keep trending downwards. So, the trajectory that we were experiencing where the AOGs (aircraft on ground) were increasing has now taken a turn,” Negi said in an investor call.
To be sure, P&W does compensate IndiGo for the groundings, but the compensation does not fully offset the cost impact of the mitigation measures, according to the airline’s management. IndiGo does not detail the compensation it receives from the engine maker, which is included in the airline’s total revenue.
“The impact of the profitability related to the costlier mitigation measure will also start to moderate downwards as we start returning the short-term damp leases sometime in the first half of the next year. During the quarter (July-September), we inducted 31 aircraft, of which nine were inducted as part of the mitigation measures,” Negi said.
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In November last year, Indigo had announced that it was expecting aircraft groundings due to engine inspections in view of the powder metal issue with P&W engines. These groundings were to be in addition to the 40-odd IndiGo planes that were already grounded due to earlier issues with the engines. In July 2023, P&W had said that a powder metal defect could lead to cracking of some engine components in its geared turbofan engines for the A320neo aircraft, and called for accelerated inspections of the engines and shop visits globally.
These “costlier mitigation measures” shared the blame for the airline reporting a net loss of nearly Rs 1,000 crore in the September quarter against a profit of around Rs 190 crore in the year-ago period. The loss came as a bit of a surprise and followed seven straight quarters of profits.
“IndiGo’s growth and expansion continued as our topline grew by 14.6 percent on a year over year basis, in the second quarter to 178 billion rupees (Rs 17,800 crore). In a traditionally weaker second quarter, results were further impacted by headwinds related to groundings and fuel costs,” Elbers said.
The airline’s total cost for the quarter rose nearly 22 per cent year-on-year to 18,666 crore, with fuel cost rising almost 13 per cent to Rs 6,605 crore. Fuel is the biggest cost for Indian airlines and accounts for over 30 per cent of their operational expenditure. Apart from higher fuel costs and expenses related to mitigation measures pertaining to grounded aircraft, Negi said that the “inflationary environment” also played a role in bumping up the airline’s costs.
