IndiGo to tap ancillary revenue to boost profits

IndiGo to tap ancillary revenue to boost profits

IndiGo is now bracing for a major expansion including in its international operations, especially to China, Middle East and South East Asia.

IndiGo is now bracing for a major expansion including in its international operations, especially to China, Middle East and South East Asia.

New Delhi: IndiGo, India’s largest airline by market share, will focus on ancillary revenues to boost profits at a time high fuel costs and intense competition are eroding margins, parent Interglobe Aviation Ltd informed shareholders at its annual general meeting (AGM) in New Delhi today. Ancillary revenues would include receipts from cargo, special service requests, ticket modification and cancellation, in-flight sales and tours.

In intensely competitive and high volume-low margin industries such as auto-fuel retail, businesses depend on ancillary revenues to boost profits. Indian Oil Corp. Ltd, for example, houses retail outlets at gas station premises for alternate revenue streams.

Gregory Taylor, senior adviser on the management executive committee of InterGlobe Aviation Ltd, informed shareholders that ancillary revenue is a focus area for IndiGo and that it will try to redefine the products and services in this line up besides stepping up marketing effort, a person who attended the AGM, which was not open to the press, said on condition of anonymity.

Company executives told shareholders that the airline is not able to pass the high jet fuel cost to the customer on account of the competition, said this person. The IndiGo management believes that although the current airfare levels are not sustainable, the company is well placed to withstand these pressures and, over time, fares will become more realistic.

IndiGo had in July reported 97% fall in its June quarter profit—its biggest-ever drop since going public in 2015—to ₹ 27.79 crore from ₹ 811.14 crore a year earlier.

Chief financial officer Rohit Philip informed that price competition has impacted revenue per available seat kilometers in the June quarter, the person quoted above said. It was ₹ 3.7 in the June quarter compared to ₹ 3.82 a year ago, denoting a decline of 3.1%.

The airline, which had to ground several A320Neo aircraft due to safety related issues, informed shareholders that aircraft grounding was a well established and planned procedure for reviewing engines at specified points in time and that all matters are under control now.

IndiGo is now bracing for a major expansion including in its international operations, especially to China, Middle East and South East Asia.

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