IndiGo, India’s largest domestic airline, may shelve a planned share sale to raise ₹4,000 crore as it is hopeful that an increase in ticket sales in the coming months will negate the need to bolster its cash reserves.
This is despite predictions that the country’s civil aviation market will suffer a big blow this fiscal from the effects of the coronavirus pandemic that saw one of the world’s strictest lockdowns and a two-month suspension of domestic air travel.
The board of InterGlobe Aviation Ltd had on 10 August approved raising funds through Qualified Institutional Placement (QIP).
However, addressing shareholders at the airline’s 17th annual general meeting on Friday, IndiGo’s chief executive Ronojoy Dutta said there is currently a 50% chance of the QIP taking place.
IndiGo’s chief operating officer Wolfgang Prock-Schauer said on Thursday that the carrier is betting big on the festive season for a revival in demand as it is seeing an increase in flight bookings in line with the easing of travel restrictions.
The airline is using about a third of its capacity on local routes, which it expects to increase to as much as 60% by Diwali, Prock-Schauer said.
He said IndiGo is now filling about 70% of its aircraft seats, up from 55% earlier, though fliers wary of frequent changes in travel curbs by states are opting for short-term bookings.
According to consultant Capa India, the immediate impact on the aviation market is due to health worries and travel curbs, and that “the full force of the economic downturn and supply-side risks may only become apparent in FY2022″.
“Excluding IndiGo, the cash position of the industry as on 31March 2020 was just $200 million (IndiGo had $1.36 billion),” Capa said in a 21 August report.
Credit rating agency Icra has predicted a 41-46% decline in domestic passenger traffic this fiscal, though the second half will witness some recovery with the decline narrowing to 3-14% in the March quarter.
IndiGo’s shareholder meeting was held virtually due to the pandemic.
The promoters are involved in a feud that is currently under arbitration before the London Court of International Arbitration.
At the AGM, CEO Dutta said the airline has managed to reduce its daily cash burn to ₹30 crore this quarter from ₹40 crore in the June quarter.
He also said that the airline is currently utilizing about 35% of its fleet due to the various travel curbs imposed by states.
“We are aggressively adding capacity and hope to take that utilization number up as fast as we can,” he added.
IndiGo posted a record net loss in the June quarter of ₹2,844.3 crore.
The airline had a total cash balance of ₹18,449.8 crore, comprising ₹7,527.6 crore of free cash and ₹10,922.2 crore of restricted cash as of June-end.
This article was first published on livemint.com.