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Good evening, ladies and gentlemen, and welcome to IndiGo's conference call to discuss the second quarter of fiscal year 2021 financial results. My name is Aman, and I'll be your coordinator. [Operator Instructions] As a reminder, today's conference call is being recorded.I'd now like to hand the conference over to your moderator, Mr. Ankur Goel, Head of Investor Relations for IndiGo. Thank you, and over to you, sir.
Good evening, everyone, and thank you for joining us for the second quarter fiscal year 2021 earnings call. We hope that you and your families are safe in these difficult times. We have with us our Chief Executive Officer, Ronojoy Dutta; and our Chief Financial Officer; Aditya Pande, to take you through our performance for the quarter. Wolfgang Prock-Schauer, our Chief Operating Officer; and Sanjay Kumar, our Chief Strategy and Revenue Officer, are also with us and are available for the Q&A session.Before we begin, please note that today's discussion may contain certain statements on our business or financials, which may be construed as forward looking. Our actual results may be materially different from these forward-looking statements. The information provided on this call is as of today's date, and we undertake no obligation to update the information subsequently.A transcript of today's call will also be archived on our website. We will upload the transcript of today's prepared remarks within an hour. The transcript of the Q&A session will be loaded subsequently.With this, let me hand over the call to Rono Dutta.
Good evening, everyone, and thank you for joining us on this call. I trust all is well at your end. We reported a net loss of INR 11.9 billion in the September quarter compared to a net loss of INR 10.6 billion in the same period last year. Given the government restrictions in place for capacity deployment, we could only deploy around 37% of last year's capacity. We were able to add capacity throughout the quarter and ended up in September at around 47% of last September's capacity.As you all know, IndiGo has always been exceptionally well-run airlines. And since we were restarting the airline after the lockdown, we were determined to use this opportunity to get better at everything we do. Thus, we set aggressive goals for ourselves for improving our product delivery, customer service, brand value, employee engagement, cost reduction, liquidity and revenue generation.I would like to share some of the specific changes that our teams have implemented since the restart of operations. Our operations team developed new processes for customer service to ensure the highest standards of public health and safety. Our digital team is on an ambitious plan for digitizing all customer touch points, from the initial reservation to bag delivery. The new mantra of our digital team is no more paperwork, no queues or phone calls, let's digitize everything.We launched all cargo flights as a stand-alone revenue stream. Somewhat incredibly, we are now carrying more cargo at much lower capacity than we did at 100% capacity. We set sensible goals for cost reduction and are making good progress on several fronts. Once we get our capacity back to reasonable levels, our unit costs will probably be lower than what we had before the operational shutdown. We focused on our cash balance as a key priority. Aditya will give you an update on our cash position and cost reduction measures when he takes you through the financial performance in detail.Our commercial team has artfully fashioned a new network that observes all the capacity restrictions and yet maximizes revenue. Simultaneously, we've been able to transform ourselves from purely scheduled carrier to one also adding charter operations and this has significantly enhanced our revenue performance. Our operation team set higher goal for on-time performance, customer complaint handling and baggage delivery. Since June '20 we've been #1 or #2 in terms of on-time performance.We continue to return our classic engine aircraft, thereby increasing our overall fleet efficiency. We wanted to improve our brand perception. Our ‘Lean Clean Flying Machine’ seems to be having a lot of traction in the marketplace. While we wanted to design an even better and upgraded IndiGo, we very much wanted to preserve our greatest and most critical strength, which is our tightly bonded and enthusiastic employee culture.I am pleased to report that we are encouraged with the progress we are making on several underlying measures of strength. We are ranked the safest airline in India by the Safe Travel Barometer, which is the world's most comprehensive database for COVID-19 traveler health and safety, and has released the safe travel score for airlines worldwide.Our Net Promoter Score continues to improve and is even higher than the last quarter. Further, improvement in the product has resulted in a higher customer preference for our airlines. And as a result, we are carrying higher number of passengers at around 58% of domestic passengers in September versus 48% in January.I am pleased to be able to report that IndiGo is now positioned as the 33rd most valuable brand in India by Campaign India. This is a significant jump of 52 positions from a year ago. Our internal employee engagement scores are at an all-time high. It is heartening to know that employees feel inspired and motivated even during these difficult times.Our low levels of aircraft utilization continue to remain a major concern. And the fact that we were only able to fly around 37% of our capacity had a significant impact on our financial performance. However, we've been gradually increasing our capacity. And we hope to be utilizing 60% of our third quarter fiscal 2020 capacity in terms of ASKs in the third quarter of 2021.Talking about the revenue performance during the quarter, on a year-over-year basis, our yield has improved by almost 9%. But our load factors are down by 18.5 points, leading to a reduction in RASK, or unit revenue, by 5.4%. I am pleased to note that our September end free cash balance was INR 69.7 billion, which is higher than our internal forecast. We acknowledge that we still have a lot to do in terms of complete recovery to prepandemic levels. But I'd like to assure you that this management team is working diligently to address all the risks and opportunities that are on the table.And with that, let me hand over the call to Aditya to discuss the financial performance in further detail.
Thank you, Rono, and good evening, everyone. For the quarter ended September 2020, we reported a net loss of INR 11.9 billion compared to a loss after tax of INR 10.6 billion on a year-over-year basis. We reported an EBITDAR of INR 4.1 billion compared to an EBITDAR of INR 2.6 billion during the same period last year. During the quarter, we operated at 36.7% of our year-over-year capacity, which is somewhat lower than our previous guidance of 40%. The gap was primarily driven by capacity restrictions imposed by various state governments for a considerable part of the quarter, which had an impact on the pace of our capacity deployment.The key highlights of our performance during the quarter can be best summarized by the following points. We operated at a load factor of 61.1% (sic) [ 65.1% ], an increase of 3.8 points as compared to the previous quarter sequentially. On a year-over-year basis, our yields increased by 8.9% to INR 3.83. However, our RASK reduced by 5.4% to INR 3.24, primarily driven by reduction in our load factors by 18.5 points. Our passenger and cargo charters continue to perform well, adding to our overall revenue performance.Our fuel cash decreased by 43.4% compared to 32.2% reduction in average ATF prices on a year-over-year basis. Our overall fuel management policies, including a mix of efficient engines, effective purchasing contracts and initiatives for reducing fuel burn, are one of the bright spots in our performance. Our ancillary revenues, including cargo, continues to be strong, helping us to generate much needed revenue at this time.Moving on to the most important update on our cash position and liquidity. We ended the quarter with a free cash of INR 69.7 billion, a reduction of INR 5.6 billion as compared to free cash at June 30, '20. As we have added more capacity, our net cash burn per day reduced from INR 300 million per day in June '20 to an average of INR 250 million per day in the quarter.We have spoken about various liquidity initiatives totaling to INR 60 billion in our past calls. During the quarter, despite a tough environment, we have secured sanction for working capital from a bank that can help infuse additional liquidity of INR 6 billion. This sanction also demonstrates the faith lenders have in our balance sheet and resilience of the company. Of the INR 66 billion of potential liquidity increase, half has already been raised and the other half will be raised in the next couple of quarters. We continue to work on more options to enhance liquidity even further.While our Board has approved raising of funds by way of qualified institutional placement aggregating INR 40 billion, we are currently looking at all debt options before we take any decision for this fund raise. Further, on the basis of the current revenue improvements, we are deferring the decision of QIP until the end of December 2020.Now let me give you an update on the cost front: Supplementary rentals and maintenance costs; this cost comprises 2 major components; first is the supplementary rentals that are largely variable; and second, other maintenance costs that are largely fixed or event based. Given that we have deployed only 37% of our capacity compared to the pre-COVID period, this number is lower than historical levels. We expect this number to increase as we keep on deploying more capacity.Our payroll costs reduced by 35.5% as compared to the March quarter as all our initiatives on payroll cost reduction have taken full effect in this quarter.On the other key balance sheet numbers, we ended the quarter with capitalized operating lease liability of INR 229.3 billion and total debt, including the capitalized operating lease liability, of INR 254.2 billion.In summary, we are in a stable position with respect to our liquidity. Our costs have come down, and the increase in capacity is further improving our net cash burn. However, we also understand that times are still unpredictable, and we need to continue to fight a battle against this pandemic.With this, let me hand it back to Ankur.
Thank you, Rono and Aditya. [Operator Instructions] And with that, we are ready for the Q&A.
[Operator Instructions] The first question is from the line of Sonal Gupta from UBS.
Just wanted to understand, one, in terms of the -- I mean, like -- sorry, what I was trying to understand is what is the clarity there is now on the international operations because when you're guiding for like 60% utilization of fleet and last year almost like 25% of fleet was sort of deployed on international. So I mean you're sort of implying if there was no international that almost 80% of domestic would be sort of back. So just wanted to get what is the sort of clarity on the international side. How do you see that ramping up?
So let me answer the question more broadly on overall capacity because I'm sure there'll be other follow-up questions on this. So first, let's talk of domestic and then I'll also go into international. Domestic at this point, as we said, last quarter, we ended September with about 47%. Today, as we speak, we are close to 60%, slightly short of 60%. Now all indications are that the government will be lifting that capacity cap, which right now is 60% domestically to around 80%. So we don't know when that will happen, but we are encouraged by the discussions that are going on. So our best guess is, domestically, we'll be at 80% capacity by the end of the year, early next year.Now let me talk about international specifically. We have been doing international in various ways through, as you know, Vande Bharat side, charters and bubble flights. How much exactly are we doing? Well, September -- over September, if you look at all international flights, we have got at 20% of last September. Last September to September, that where we are. The government continues to improve -- introduce more bubble flights, Bangladesh is opening up and so forth.We know there'll be no schedule service till the end of November, at least. After that, how quickly it will progress, we don't know. But to answer your question right now, we are at about 20% internationally, and then we'll have to wait and see. Domestically, we are a little more aggressive in terms of our expectations.
The next question is from the line of Ashish Shah from Centrum Broking.
Just wanted to check in terms of the lease rentals, which we would have deferred during the first half. We see that in the cash flow statement, there are probably about INR 1,300 crores of lease rental payments, which are reflected. So how much of the rentals will be deferred here and not reflected in the cash flow?
So as we said even during the last quarter, we have not deferred any lease payments. So we are current on all our lease payments, and we continue to honor them as per the schedule. So we were current in 1Q and we continue be current in second quarter as well. So there is no pendency on the lease payments as such.
The next question is from the line of Lokesh Garg from Crédit Suisse.
I would like to ask you a question on fleet plan. Basically, we have seen fleet has continued to grow while, obviously, the utilization, as you said, remains in the 37% range. So should we expect a large bunched fleet sort of used plane returns at the end of the year? And there are planes coming up currently also which is both neo and 321neos. Is there any update that you can share in terms of renegotiations with Airbus on any delivery delays or any delivery time line renegotiations?
So we always have a plan to return the classic ceo aircraft. And we are still on track on that. We're returning them as fast as we can, but according to our old plan. And then between the operations team and maintenance and aircraft finance, they have done a great job in terms of -- despite the disruptions that you've seen worldwide. A lot of planes have been placed with MROs across the world in terms of returning the airplanes. So we are on track on that, and those numbers are quite large, anywhere 30 to 40 a year, and we continue to return those.As far as the deliveries are concerned, we are not doing any major renegotiations with Airbus. We are taking whatever was on plan. There's a push-pull every month-to-month because they want to delay one, we want to accelerate one. But largely, we are on track. So our peak plan is very stable, it hasn't changed much, and we are proceeding according to our plans.
Sure. So basically, between, let's say, June to September, there is only 6 ceo planes that seems to have reduced. If the plan is to do 30, 40 each year, then a lot of them would go towards December, is it?
Wolfgang, do you want to take that question?
Yes. You are -- basically, you are on the right track, so to say, because if -- during this lockdown situation, there was a slight delay, but it was always on track, and now the returns are catching up. And we see getting the lease returns getting momentum. So we can balance whatever comes in, we balance somehow with lease returns. And that's our strategy with this fast return cycle that we keep -- make our fleet younger, by the way, by this way and stabilize the fleet as Rono has mentioned.
The next question is from the line of Deepika Mundra from JPMorgan.
Sir, I remember in your last call you mentioned 60% to 70%...
Deepika, your audio is breaking. May we request you to use the handset or come in network area, please?
Am I audible now?
Yes, slightly better, but still the audio is breaking.
I am just going to keep it short. So on the ASP, you mentioned 60% to 70% last...
Deepika, you're not clear. I'm sorry to interrupt. May I please request you to redial in again, please?
Okay. Sure.
The next question is from the line of Vipul Garg from Kotak.
The question is that how is the cash position? Because the -- at present, this quarter, we had a loss of about INR 1,100 crores, out of which INR 500 crores was boosted by the ForEx gains. So effectively, loss of INR 1,600 crores, if we leave aside the ForEx part. But the cash position is not -- has not decreased by that much amount. So whether any monetization of assets, et cetera, has taken place?And then there's a second question regarding the supplementary rentals, the -- though the flights have improved vis-à-vis Q1, supplementary rental amount is same. So has any renegotiation or some deferment has taken place on the supplementary rental part?
So I'll take these. So you're right. I mean we have infused liquidity. Even if you recall, at the end of last quarter, we had mentioned that we will generate INR 6,000 crores of liquidity. So we have infused some liquidity out of that, including selling some of our assets, as we had called out earlier. So that's where you see the delta between the losses and the net cash burn. So our net cash burn from INR 7,400 crores is down to -- cash is down from INR 7,400 crores to INR 6,900 crores. So net cash burn for us is INR 500 crores for the quarter. So that's the answer to your first question.So supplementary rentals between second quarter and third quarter are up. They are up by roughly INR 100 crores. And that's primarily driven by the fact that we put more capacity. And since we put more capacity, supplementary rentals driven by capacity have obviously increased. So you've seen an increase. It's not to the range of where it originally evolved in March or in periods, which were prevailing earlier. But there has been an increase, largely driven by capacity. So last quarter, this number was INR 739 crores. This has gone up to INR 842 crores in the current quarter.
Sir, earlier, I think, there was some deferment of this supplementary rental. So still that deferment is continuing?
So the way to think about deferment of supplementary rental is that we neither owe them as well. So how the process works is that we will put up an LC upfront at the beginning of the year and that reconciles at the end of the year basis is the usage of the aircraft. The fact that we are not deploying capacity anyway because of the situations, we have worked with the lessors to make sure that we don't put up those LCs as well. So effectively, we are neither putting them up nor repaying. So it's not that there will be a catch-up of this after 6 months or 9 months.
Okay. And sir, how much monetization was done during this quarter?
So we did an overall monetization of INR 1,800 crores in the quarter.
The next question is from the line of Achal Kumar from HSBC.
I had one. So first of all, on the cash, just taking the last question forward, so I can see that the owned aircraft has been reduced from 29 to 22. So does that mean you have done the sale and leaseback of all the unencumbered aircraft and you don't have any more aircraft through the sale and leaseback?
No, we've got 7 more ATRs that we're going to put on a sale and leaseback structure in the current quarter. What we have done so far are 4 ATRs and 3 ceo engines that we own -- ceo planes that we own.
And that's what you're showing INR 1,000 crores in your cash flow statement, right?
Right.
Okay. Okay. Second thing, I also want to understand the PDP burden. So now what is the status with your CFM engine? And what kind of PDP burden you see due to the CFM and due to the new aircraft coming in? Is there any change in the PDP burden because the leasing market is changing. So what kind of PDP burden you are expecting?
So there is no incremental PDP burden on us. I mean, this is as per contract that we have negotiated with Airbus, and we continued on the same path. It's neither gone up nor has it come down. So we continue with the same PDP payments that are as per our contract and plan with Airbus.
Even with the CFM?
Yes. I mean, this is with Airbus. I mean, these payments are through Airbus. CFM is an engine provider to Airbus. So whatever our contract is with Airbus, we continue down the same path.
Okay. Right. The last question. I wanted to understand about the yield because the fares remains so low and still the yields are very high. So basically, what is the situation of the underlying yield? And what is it that is leading into this yield to be so strong?
Let Sanjay answer that question since he worked this. What did you do, Sanjay?
So yields are better compared to last year same quarter. And I would contribute this to be basically the directional demand. If you remember in the first quarter of the year, we had people moving out metro to non-metros and other cities. But now what we saw in the quarter 2 was traffic returning back to the metros. So that was one reason we saw huge demand in those for markets, non-metros to metros.And then also there was a limitation on the capacity side. There is still some constraint as far as some markets are concerned, like Kolkata and Mumbai, which are still constrained due to the local state regulations. And that is also because their lack of capacity in those markets, we are seeing better yield. So overall, it is the combination of lesser capacity, increased demand in the marketplace, which has kind of helped us in terms of yield improvement.
And I would add to that. The charter yields have also been very good.
That's correct, yes.
So we're pushing that as hard as we can.
It's a combination of all these. I mean, charter also is an important aspect of this.
Look, we said always that as we start, we will design the network as artfully as possible in order to pick the right markets, the right frequencies. And that's what you're seeing in the yield improvement. I think the commercial team between planning and sales and revenue management, they've done a great job in picking all the right destinations and schedules.
The next question is from the line of Deepika Mundra from JPMorgan.
I hope you can hear me now. Just a couple of questions for my side. So firstly, on the ASP, I think last quarter, you all mentioned 60% to 70% in the December quarter. Should be operational, you mentioned 60%. Is there a tone -- is it -- are your expectations slightly lower for the festive period? And secondly, on the yield, I mean, last 2 quarters have been very strong. As more of your capacity comes -- becomes operational, do you see this advantage repeating?
Okay. So let's clarify the capacity issue. We are close to 60% right now, as we speak today. We're not at 60%, we're at around 58%. So we're not saying 60% by the end of the year. Now can we go above 60%? That will depend mostly on the government because we are capped at 60% right now. We are hopeful that the government is going to increase it to 80% in the next couple of weeks or so. And if the government does, then we'll be at 80% by the end of the year. I hope there's no confusion on that. We are at 60% now, hope to get at 80%.As to the yield, what happens as capacity grows out? One of the problems we are facing, of course, is, normally, as you know, we like to have a 3-month booking curve. So when we open new capacity, we said, let it book for 3 months before we actually start flying. That's obviously not happening today.So if the government says, add 80%, we'll go to 80% within 10 days, within 10 days of booking. So obviously, it starts off somewhat soft, but then it picks up very quickly. So that's why we're saying we're stair stepping our way to higher revenues because it's not moving smoothly. It's like, okay, the government says 45%, we are at 45%; the government at 60%. We opened up a bunch of new cities and schedules and frequencies. They don't book immediately, obviously.So there is a lag for 2 weeks, but then it picks up nicely. So that's what we are seeing. And if the government now goes to 80%, we'll have a temporary stall, if you will. Our revenue won't immediately go up. But it seems to go up in 2, 3 weeks, that's why we are quite positive on it.Look, I think it's important to make this statement. Back in March, we had no idea what's going to happen, right? I mean, we had all these scenarios, from things that were really bad, to things that get better quickly. The good news is, given the last 4, 5 months of experience, all those really bad scenarios are off the table. Yes, things won't get great quickly, but things are definitely not as bad as we might have feared back in March. So all that gives us room for some optimism.
The next question is from the line of Binay Singh from Morgan Stanley.
Apologies in case this question has already been answered. But what would be your exit cash burn for Q2 per month? Like in Q1, we were saying it was around $120 million.
So our exit -- our average cash burn for the quarter is INR 25 crores a day. This number was INR 30 crores a day at the end of last quarter.
Okay. And the salary number that is being reflected into the quarter, is it reflecting the staff cuts that you had, had?
Yes. The staff costs got effective this quarter. So that does reflect the staff cuts as well.
It actually captures three things; the staff cuts, the pay cuts and the leave without pay. All those three things are coming into...
Right. It's a combination of all the three.
So in a way, this is -- this number will not fall further, it should largely remain around this level?
So -- yes, it will not change too much. But I mean, as capacity comes back, I mean, the leave without pay may settle back a little bit. So there will be some differences around that. But it is -- I mean, we're sticking to our earlier guidance of this being 30% lower than the pre-COVID levels. So we are comfortable with that.
Right. And just lastly, one question. Could you talk a little bit about customer mix change pre-COVID to now anything on corporate? Or what sort of customers are traveling today versus earlier? That's it.
Yes. Sanjay will take that question.
So the pre-COVID level, the corporate business and the business travel, if I may put it, used to be about 50% of the overall traffic. But now post-COVID and things like resumption of the flight, this traffic is still yet to come back to the original level. I think as we are expanding and opening up our capacity on a month-on-month basis, more and more customers are flying and with the experience which they are getting, I think it is a matter of time, we will start seeing the corporates also coming back.And just to kind of put some perspective, we are seeing some traction already happening, especially from the SMEs and even businessman coming onboard, doing their business, traveling for their business. So that thing is already happening. While it is nowhere comparison to the pre-COVID level, but we hope that next few months, I think, things will start to change there as well.
The next question is from the line of Abhinav Bhandari from Nippon India Mutual Fund.
Just continuing on the staff cost, once again, there was expected to be a onetime settlement fee, if you can say that to come in Q2 as well for the 10% of the workforce. So is that included in this number of the employee cost for this quarter?
Yes, that number -- the severance pay that we paid out to the employees is included in this number.
So to that extent, next quarter may not have that number. So if you can guide what's the ballpark number for that?
So we're not giving a quarterly guidance of this number. What we are saying is that we will be 30% lower than what we committed that we guided earlier from the pre-COVID levels.
Sure. And the other question was on the other current liabilities, which have fallen sharply in balance sheet. So if you can just guide on what has happened there?
Other current liabilities?
Yes. It has come off from about, I think, INR 2,400-odd crores to INR 1,700-odd crores, that number.
Okay. Here is what I'd suggest. Aditya is just looking at those numbers right now. So, let's take the next question, and we'll come back and answer.
Yes, maybe, I think, I got the answer. I mean -- so a couple of things have happened over here: One, we were carrying a large credit shell at the beginning of the quarter. That credit shell has come down; secondly, also, we were carrying forward sales, which was higher at the end of March from where you've seen the comparisons. Those forward sales are lower as well. As you can imagine our capacity that we're deploying is much lower. So those are the 2 factors driving this INR 2,415 crores down to INR 1,758 crores.
The next question is from the line of Aditya Mongia from Kotak Securities.
The question which I had was more on the international aspirations of IndiGo. And the recent ATMs or slots that IndiGo has won in the London Heathrow airport, I wanted to get a sense from you that is this a serious step towards starting flights from London to India? Or more like an experiment at this point of time?
So look, our international aspirations are high, but the gate was narrow-bodies -- and sort of a narrow-body range. So as soon as the international opens up, we hope to, again, expand in all directions as fast as we can, but with the narrow-bodies. And the wide-bodies, we looked at it many times. And again, until the numbers work for us, we're not going to do it.And I have to say the numbers are looking better now than they did before primarily because the wide-body costs have come down so much, fuel is down, all that has helped, but it's still not in the green, it's still showing red.So we don't want to do it until the numbers turn green, basically that has been the viewpoint. So it's still a watch and wait. But without that, I mean, on the narrow-body side, we want to expand very quickly as soon as the capacity restrictions are removed.
Fair. Just a second question from my side. You talked about a loss number of INR 25 crores on an average basis. Would you be able to provide the loss number as of end of September or the current number?
We guide based on what is in the quarter because there's a lot of seasonality in this number. For example, as we're now getting into the festive season, you will -- we will see an improvement in this cash fund. So I think it's good to look at it from an overall quarter perspective. So we were INR 30 crores last quarter, we have INR 25 crores on an average this quarter. And we hope as we keep on building capacity and as businesses start getting back, this number will keep on decreasing as we go ahead.
The next question is from the line of Pulkit Patni from Goldman Sachs.
My first question is for Aditya. Aditya, just wanted to help this reconciliation. The cash balance that we started March with versus the cash burn that you speak about INR 30 crores and INR 25 crores and the INR 1,800 crore monetization that you mentioned you did in this quarter, based on that, our sense is that probably another INR 3,000 crore worth of monetization is what we could do to achieve that number. Is that ballpark right, another INR 3,000 crore worth of monetization that could happen over the next 3 to 6 months?
So you are bang on the number. We will be just slightly ahead of INR 3,000 crores of monetization in the next couple of quarters. So that number -- your number is absolutely right.
Okay. Okay. And secondly, just to double check, when we talk about the yields, in case of charter flights, we are also taking into consideration the ASK for the charter flight, right? That's how we get to the field.
Yes. Yes.
Okay. Okay. Both of them, sir. Okay. Very helpful. And a good set of numbers.
The next question is from the line of Mayur Milak from BOB Capital.
Yes. So going to the numbers, just wanted to understand looking here. So when we said that the ASK for the quarter stands here, ideally I am trying to understand that this is more like a supply, right? So how did the supply really come off? I mean, from the quarterly perspective?
The supply of the ASKs, you're saying? Well I mean...
Yes.
The supply of the ASKs is based mostly on the government restriction. So when we started in March, the government said, you can -- everyone, not just IndiGo, you can all fly 25% of the capacity. So we all did. And then the government said, you can now fly, I think, it was 45% capacity, so we've bumped up there. Then the government said, you can fly 60% capacity. So we've bumped up to 58%. And although the government -- the central government is saying 60%, the state governments are sort of restricting us. So as you know, Mumbai, Chennai, Kolkata, they have their own restrictions. So we don't quite reach 60% as a result.So is that the question you're having? Where did the supply -- why is the supply restricted? It's restricted by government restrictions.
Yes. And then when this happens, all the other expenses relating to the aircraft, the fixed cost, whether that's the maintenance cost or the rental cost, does that also get equally down to the supply that is available during the quarter or that really stays for the entire fleet that we have?
Well, the leasing costs are fixed. So those are period costs, and we incur them irrespective of the capacity. Maintenance costs have got 2 elements of it. One is the variable element, which you're right. It varies based on how much you fly, which is supplementary rental, but there are fixed elements that are independent of capacity. So you know you've to incur the fixed elements. So that's how our costs are overall made up of.
All right. And fuel, of course, I'd want to believe only to the tune that you fly, but you incur the entire cost, right? And part of it would have got covered into the cargoes also that you would have typically taken?
No. So fuel is variable. Fuel is based on how much capacity we fly. So for example, if we are not flying an aircraft of that capacity, we will not incur the fuel costs associated with it. So therefore, you'll see a fairly sharp drop in our fuel costs even as compared to our capacity deployed. That's primarily because; A, the rates are lower from last year; and we're flying more official planes than we were doing last year, the neo aircraft. But fuel is totally variable.
All right. Just last question. We've seen the other income also come off. So is that more a relation to the kind of cash flow that we've had? And that is why you see the other income really come off?
No. Other income doesn't have any relation because our cash -- average cash for the quarter has not been down that much compared to last year. That you're seeing because, as you're aware, I mean, our rates have come down fairly dramatically. What we earn on the assets or the investments that we put in the market. I mean in mutual fund, returns are down; fixed deposit, returns are down. You know, I mean, compared to last year, those yields are down fairly significantly. That's contributing to our interest income being down.
The next question is from the line of Arvind Sharma from Citi.
I just wanted to get some more clarity on the nonscheduled and scheduled operations. So if you could give a breakup of ASKs and RPKs between scheduled and nonscheduled, that would be really very.
So I think we told you what the international is, that international we are doing 20% of last September's capacity. And most of that -- most of the schedule -- nonscheduled, charters, Vande Bharat, bubbles are all international. There's some domestic, but very little.
Okay. And in the domestic, there is no nonscheduled site. So whatever we see beyond the monthly data that you show is essentially the nonscheduled international flights. That's how it is there, right?
I'd say 95%. There's about 5%, 6% of domestic charter, sometimes people want to do something to Jaipur for a wedding or something. So there are a few of those, but very few.
And this number should sustain until the regular operations start?
Well, we hopefully will grow because more countries are coming into the bubble side. As I said, Bangladesh just opened. We are hoping Nepal opens. So -- and we are pushing the government to include more and more, like 2-way scheme or lineup few weeks ago. So we hope that it will grow, but it's not growing in leaps and bounds, it's growing slowly.
But it will not be predominantly seat basis. So it will be a very lumpy sort of an operation?
Yes. Yes, I guess you could say that. But we are hoping that after November, things will open up more aggressively.
The next question is from the line of Aditya Makharia from HDFC.
Just a couple of questions. Our fleet was 245 planes last year. This year, we're already opportunity to 282. I understand there's going to be a rundown on the ceos and a scale up in the neos. But what is the peak plane capacity we would reach from which we would start stabilizing?
So look, for the next couple of years, we'll see a slow drip down. It's not going to be sharp. We'll take -- we'll continue to take delivery of new airplanes. We'll continue to push out the ceos. So our fleet count will stagnant and go down a little. But from 2023, we'll be back up again. So I'd say flat to down for a couple of years and then up again.
So you're saying in '22, we would still be up? And then, obviously, we'll be down?
No, other way around. In '22, we'll be down slightly; by '23, we'll be up again. This fiscal year.
Okay. Fair. Second, sir, obviously, because of what's happening in terms of the volumes coming down sharply, are you seeing any players who are withdrawing from the market or any...
None whatsoever, no. I mean, Jet is coming into the market. So there will probably be more players.
Okay. So nothing on the competitive intensity easing in that sense?
No, not at all.
Okay. And just last one, housekeeping question. The cargo revenues, what were they this quarter? And how we've accounted for it?
Well, cargo is a very good story for us. So year-over-year, yes, if you look at this quarter versus last year this quarter, cargo revenues are up 20%, which is a pretty staggering number in my mind, given that our capacity was down to 27%. And as you know, we don't even have any freighters. So I think our people, both in operations and cargo, have been very, very innovative in dealing with this full opportunity. No freighters at all and yet just with cargo and the cabin and so forth, our cargo revenue is up 20%. Not only is it up, the trend is also up.So if I look at the year-over-year numbers, in July, our cargo revenue was up 9%; in August, our cargo revenue was up 20%; in September, our cargo revenue year-over-year was up 27%. I'm like, "Wow, this is a good trend." And again, hats off to our people in cargo division, sales, in our operations for making this all work. But cargo has been a very good story for us.
Sure, sir. Could you just quantify the revenue from cargo this quarter?
See, we don't give a breakup of the cargo revenue. I mean, it's very strong, as we said, when we see the trend continuing.
You can see the strength in the ancillary revenue, most of that is driven by cargo, in fact.
The next question is from the line of Sarfraz Bhimani from Motilal Oswal.
So I wanted to have further understanding on the cash part. So last quarter, we saw that we had a loss of around INR 2,800 crores, whereas our cash came down by only INR 40 crores 46:40. This quarter, we had this monetization done of around INR 1,800 crores. Still we are losing around INR 500 crores of cash. So any understanding or equation that you can give for this calculation, please?
I can talk about the current quarter. I mean, current quarter, we started at INR 7,400 crores of cash. I said we burn INR 25 crores a day. So that makes your cash point about INR 2,300 crores for the quarter. And then on top of that, we added INR 1,800 crores of liquidity that gets us to our INR 6,970 crores of cash. So that's a little bit of the math on the cash.
Got it. Got it. And so again, a follow-up on the previous question that was asked by somebody else, that we are almost close to around INR 3,200, INR 3,300 of liquidity generated within last 6 months. And still we have around 20 -- INR 1,700 crores to INR 1,800 crores of liquidity to be translated. So assuming that employee cost stays around current level, as you said that the loss without pay guys can come back, would this happen only with further sale and leaseback of the assets that you already own in terms of the planes that we have or do we have other avenues also?
Those are largely all the liquidity actions that we laid out. I mean it includes the sale and leaseback of the assets that we own. It includes aircraft deliveries that we take, any gain that we make on that. We've had some very fruitful discussions with our vendors and partners. So we've got additional liquidity coming out of it, which is permanent. We also talked about bank giving us a working capital line, which adds another INR 600 crores of liquidity to us.So it's a bunch of different things that brings the liquidity here. And we continue to run down all options from a liquidity perspective. I mean, we're hopeful that we'll add more as we go along the way.
I just want to clarify something on the employee cost side. There have been a number of questions about you were down 35% and so forth literally there. As we add capacity back, you should expect our employee costs to go up because we do have leave without pay, and our goal is to remove that leave without pay as quickly as possible. And as soon as our capacity goes up, we'll remove those pay restrictions. So you shouldn't expect that the employee pay -- costs will stay at these levels. They will creep up.
So we do stick to our guidance of what we gave right at the beginning, 30% lower employee cost from pre-pandemic levels.
Correct, which is almost closely achieved, I believe. And I also have just one last question to Rono sir that we said we might be around 80% of the capacity by the end of this calendar year or, say, fourth quarter of FY '21. Just to have a ballpark number, when can we expect it to reach 100% domestically, if not internationally, be it first quarter of next year? I'm asking in terms of -- to the challenge that we are seeing in terms PLFs. So what can those be around, like when metro to metro is coming back, can you see it going back to, say, 80% odd?
So again, the capacity of 80% is very much dependent, first of all, on the government lifting the cap to that level. That hasn't happened yet. We are hoping it happens by the end of the year. If the government is ready, we are ready. Then from 80% to go to 100%, again the same dynamics apply. If the government lifts it, we will lift it.And what seems to be happening is the government is watching it for 3, 4 months and saying, "Okay, now lift it." So they go from 25% to 45%, watch it; go from 45% to 60%; 60%, we are hoping 80%, I don't know; and then they won't immediately go to 100% the next month, they'll probably wait for 3, 4 months.So if you follow that trajectory, we would hope, this is all forecasting, not real confidence that will happen, is that by December, we'll be at 80%; and hopefully, by April, May of next year, we'll be at 100%, if the government, in fact, allows that. And that's domestic only by the way. We're not talking international.
[Operator Instructions] The next question is from the line of Ashish Shah from Centrum Broking.
Just one question. In terms of the pricing, which is prevailing in the market right now, you think that the floor on the fares, which is imposed by the government, that is keeping the pricing above the floor. And once the floor goes away, do you believe that there is a potential for prices to correct further? Or there is rationality prevailing and that might not happen?
Look, we don't operate our airlines to yields or prices. We look at unit revenues. And we feel the less restrictions, the better. We can be creative in different markets in different times. As you know, airline traffic is very, very dynamic and volatile. The demand on Tuesdays is very different from demand on Fridays. The demand in November is very different from demand in February. The demand one way to Ranchi is very different from demand out of Ranchi.So we are like, hey, how can you fix this? Just leave it up to the different airlines to decide what is right and what is wrong. This -- any kind of sort of restriction cap guidelines might work on a certain day of the week, it might work in a certain market, it might work in a certain month. But on a month-to-month, week-to-week, day-to-day, hell, no, no one can decide what the freight cap is. So we are saying, just open it up, let the airlines decide it.
The next question is from the line of Chintan Sheth from Sameeksha Capital.
Just one clarification on the working capital. You say the 50% we have availed, that has come in Q2 or in the month of October?
No, the 50% that we have availed has come in over the 6 months from the pandemic, so that's from April to September.
Okay. And in terms of -- we are still at INR 25 crore daily average cash burn. At 80% and our load factors are still at 65% -- around 60%, 65%, any -- given all the cost control and cost optimization we have done so far, the past 6 months, what can be like a breakeven, if at all, when we reach at 80% or 100% over the next year?
So that's a -- it's a tough question to answer because there are so many factors associated with breakeven. I mean, the yields have to continue, competitive behavior has to continue the same way, fuel and FX have to remain where they are. So it's very difficult to give a guidance as to where do you end up being breakeven as such. So there's -- you'll be very careful to estimate a particular number as to -- at what level of breakeven. There are so many variables that play at it. It's very difficult to call out a number at which you will get to breakeven.But if everything remains the way it is today, and nothing really changes, upwards of 85-odd percent or slightly higher, we can achieve breakeven. But again I will caution you against the fact that there are too many underlying assumptions to it and even one assumption changing can fairly dramatically change that number. So it's not a number that you should go to the bank with.
Right. And INR 1,800 crores asset monetization doesn't include the INR 300 crores of working capital, right?
INR 300 crore of working capital, I didn't understand. I mean, we said INR 3,300 crores of overall liquidity over the last 6 months.
Yes. So working capital, you have tied around INR 600 crores, of which 50% has come, right, over the past 6 months?
No. So it's not. I got your question now. So the working capital is the line available to us. We've not tapped into it so far. So it's available for us to utilize. It's something that we have signed up only this quarter, in the current quarter. It wasn't effective in the last quarter. So it's something that we can tap into if we have a need.
So that is why I was getting confused on the cash burn when you explained INR 2,300 crores of cash flow, INR 1,800 crore of asset monetization, I was considering INR 300 crores, which you mentioned that 50% wave and that is why I was confused.
No. So just to clarify, that number is something that we've not tapped into so far, the working capital line.
The next question is from the line of Rahul Agarwal from ICICI Prudential Life Insurance.
So I have just got 2 questions in terms of -- both in terms of the SLB margins and the lease costs. So you've seen the SLB margins this quarter and how is it going to trend, is what the sense I wanted from you. And also in terms of the lease cost, what kind of renegotiations are happening on that front, given the competition is deferring every payment, while we are paying very promptly. So what kind of benefits could come -- could you see in the coming quarter from that front?
We are current on all our lease costs, and there is no renegotiated -- renegotiation to reduce the lease costs. In fact, there is no renegotiation that the lessors will entertain. And this is not about IndiGo, this is about any other enterprise that they would be dealing with. I mean, these are fairly period in nature and fixed in nature, and they will not be any renegotiation on them. These are costs that we keep on holding.Obviously, as new planes come in, they have their own separate economics. But old planes that we have acquired at earlier dates, they continue to be at the level that they were. And we continue to honor them. And we have not been delaying any of our lease payments. And your first part of your question, I didn't get. If you could repeat that again, please?
So just carrying forward on the lease part, what I'm saying is that given the environment that we have currently and the interest cost falls and everything that has happened, the new rentals and the new planes that we have, let's say, what kind of benefits are we seeing on that front?
So the way to think about it is, yes, lease rents have fallen. The rates -- the interest rates have fallen. But also remember that the risk perception for an airline typically has gone up. So net debt, if you balance both out, I mean, there's not been any dramatic change in the economics of leasing overall. So that's something that you should give it a mind. Yes, the headline rates that you see globally have obviously reduced. But risk perception of airlines has also gone up. So our economics remain similar to what they were earlier.
Okay. So first part of my question was basically in terms of the SLB profits that we delivered this quarter, how are those profits -- going forward, do we see that, that to sustain? Or is that trend -- the falling trend would sustain and that would benefit us?
The trend is stable. It's neither falling is neither rising. I mean, we continue to get similar economics we had last quarter and the current quarter. And the market actually is coming back, I wouldn't use the word strongly, but it's coming back well, and there are more players who had exited the market are coming back again. So the market is getting more liquid as we speak.
And I'll just point out that there's been a lot of disruption on the wide-body side. Residual values have fallen, lease rates have come down, et cetera, et cetera, a lot of volatility and disruption. On the narrow-body side and particularly on the Airbus side, it's a relatively stable market. Residual values have not plummeted. Lease rates have held up reasonably well. So it is a stable market.
Ladies and gentlemen, that would be the last question for today. I now hand the conference over to Mr. Ankur Goel for closing comments. Thank you and over to you, sir.
So thank you all for joining us. Hope to see you next quarter as well.
Thank you very much. Ladies and gentlemen, on behalf of IndiGo, that concludes this conference. Thank you all for joining us, and you may now disconnect your lines.