As we move away from the cancellation episode, how will that impact capacity (10% of winter schedule cut, when do you expect it back, any impact on summer schedule) and its recurring impact on CASK ex-fuel? Are there any CASK line items, staff or so where FY '27 cost structures could be higher than today?
At this point in time, all our focus is to make sure that we have a smooth transition into the month of February, bearing in mind the capacity curtailment, which is there, leading to that capacity guidance for a growth of 10% year-over-year in this fourth quarter. All the focus of the teams and the operation is really to make sure that we have that smooth transition. At this point in time, we have not concluded yet our planning for the summer. So giving any number in terms of projected growth numbers or impact numbers would be very premature.
My question is actually a continuation on what Binay asked on the CASK ex-fuel. Your guidance during the year has changed, mostly because of exogenous factors based on FX as well as the FTDL norms. Can you give us some color as to when you're giving this latest guidance? What is the kind of FX expectations or expectations on costs that you're building in?
That's the most difficult part in terms of projecting what the FX impact is going to be. When we started the year, the guidance was that we're going to be flattish to FY 2025. Over the course of the year, then we started to moderate that guidance because the FX started to behave the way it started. We said that the CASK ex-fuel ex-forex is going to start increasing towards 1 to 2 points higher than what we had guided. Along with that came the headwind that the moderation in our AOGs was not to the same levels. And as a result, we need to bring back damp leases. The headwind on the FX continues to grow on us. Average increase that we've seen throughout the year has been a 5% increase in FX. When we started the year, it was more towards a 2% or a 3% increase. This quarter itself has been a 1% increase in FX. But the guidance that we are saying mid-single digit increase potentially factors in a reasonable kind of projection on the FX has already been catered to. If there's going to be an abnormal increase, then the unit cost will be even higher.
Do you see incremental employee costs because of inflationary aspects beyond the short-term guidance? Is that something we should probably consider given the fact that historically these cases have resulted in a really strong escalation in employee costs?
Give us time because we're planning up to March. More important point, like Pieter said, February 10 is going to be the more critical point. We'll address all aspects in terms of how we ensure that we have the right kind of manpower and support to execute to that. So, give us more time. I'll not be in a position to answer that question right now.
Can you elaborate on your pilot hiring plans which you would have been thinking in October, November before the disruption? Under new flight duty norms, how have those plans changed post disruption, if at all? And how is the industry's ability to source pilots based on number of commercial pilot licenses issued in the country annually?
Pilot planning is a constant process, which is constantly being reviewed. All the growth over the last couple of years was supported by growth of pilots as well, and we continue that track going forward. And clearly, we have a much longer horizon when it comes to pilot hiring on that. We continue on that track of consistently reviewing the schedule and hiring as well. It's a continuous process, and I don't have the exact thing of last year, October here in front of me. But clearly, it is a continuous process, and we keep focusing on that, on an adequate hiring process.
Assuming there was no cap on capacity. If you were to run your full capacity in this quarter, can you tell us what will be the total number of pilots and first officers that you'll be short of, just an absolute number?
I don't think that is a calculation one can make. You make a network and then a network has a link to a number of pilots and depending on rosters, all kind of underlying assumptions. So, we cannot just have a number and say this would have been otherwise the number. I understand you asked for any number, rough or less rough, but I don't think we're in a position to share any number.
At the 2Q call, we had stated that the PRASK is likely to remain flat or report marginal growth in 3Q. Whereas in this quarter we have seen some kind of a decline on that side. While I understand the issues that we have faced could create capacity constraints, but October and November trended well. So just wanted to understand how come the pricing got impacted in December so much that the overall track for the quarter declined on Y-o-Y?
You're right. October and November, the demand returned compared to the quarter before. We saw a healthy growth in the market. And clearly, these 3 days, there was an uncertainty how quick IndiGo would restore its operation, and there were different views on how quick the capacity would be back, and that clearly has led to some views in terms of people booking and going in other places. So, I think it's a natural sort of fallout or consequence of those 3 days. And pretty soon, I think we'll be back to regular market dynamics.
Any recurring impact of this on CASK? And to reconfirm, the impact of the new FTDL norms on the staff expense would already be built in, right?
As far as the CASK, there is going to be an increase of the CASK given the curtailment on the capacity side. What we are looking at, at least for the short term, to close FY 2026 upwards of mid-single digit compared to FY 2025. As we further refine the numbers for 2027, we'll come and communicate. But as of now, the short-term guidance towards FY 2026 is a mid-single digit increase on the CASK compared to 2025 financial year. On the FTDL staff cost, that's right - it is already built in.
You already put in some exceptional items as far as the labor code is concerned. Are there any recurring costs that we should watch out for? Going forward also, there is some changes in the way you need to make these provisions as a percentage of salary. So, any recurring kind of impact that we should watch out for?
Today, what we've done is we've taken the new labor code as an exceptional item. So, it's not coming in the cost line items. Going forward, the impact of following the new rules is going to start coming in the employee benefits line items. So, this is going to roll over from a catch-up or a true-up of the new rules, which has happened today. Tomorrow, it's all going to be part of the employee benefits line item. There's going to be an ongoing impact of truing up based on the number of employees and then the tenure, the actuaries are going to run the models and give us what the number needs to be. And then the ongoing annual inflation that you have, part of the contractual terms that you have is going to be part of the cost structure. This will start rolling in from April onwards also.
My first question would be on the current situation with pilot shortage. Just wondering if there are adequate wet lease opportunities globally for Indian airlines to meet the demand-supply mismatch.
At this point in time, we have few damp leases in operation already. So, we do have a number of damp leases supporting the network of IndiGo already, and that was decided and implemented already prior to the operational disruption. Some of the challenges we have in terms of AOGs are global supply chain challenges. And with that, there's not an abundance of lease opportunities all across the world. So, I think we are good where we are now in the wet leases we have. And these are also not leases you can induct kind of overnight. It requires a proper preparation and paperwork and all the sort of preparation to have planes here. So, we focus now on making sure that we have a good matching of the pilot availability and the program being operated, including some additional focus and preparation to make sure that the FDTL in Feb will be implemented smoothly.
Can you discuss how your schedules were adjusted versus what you were thinking on capacity growth of upwards to mid-teens for 3Q and 4Q? Is there new scenario on capacity cuts suggested by the regulator?
There was a filed schedule, and the regulator has told us to cut down on the domestic network on that file schedule, which we have done. And there's always, you filed for a season. We had already some months in operation, then there are some operational impacts. But that if you add that all together, we come to the 11% of capacity growth, which we had in Q3, and 10%, which we're now forecasting for the Q4 quarter.
The schedule adjustment - was it cutting your growth, attributable to the new routes which you would have been planning, or the popular metro to metro routes? How was it adjusted?
Together with the guidance on the capacity cut, there were some guidance on, you shouldn't cancel or should not leave certain routes. So, we looked at all factors and all sectors. Of course, we try to keep the impact for our customers as limited as possible. So, you find sectors where we used to operate 5 a day. They are now back to 4 a day or when we are 3 a day, we're back to 2 a day. We took the government order, and we try to minimize the impact on the network coverage. We have 96 domestic destinations in operation, 90% of the Indian population lives within 100 kilometers of an IndiGo served airport. So we really try to retain that proposition, make sure the connectivity remains there. You'll find it primarily on routes where we had 4, 5 a day and now cutting down to 3 or 4 a day in that network.
On the DGCA penalty, any more review is pending, which can result into a higher penalty going forward? Or this is a final reading from the regulator? And nothing incremental likely to come through going forward?
At this point in time, we have no reason to believe so. We have received the orders. The orders are being evaluated by the Board. I think there has been a press release on that from the company when the orders were received, they have been reviewed, and we have no reason to believe otherwise.
On the FDTL, the 10% guidance for the 4Q implies that we have already adequately prepared ourselves in terms of recruitment and everything and that is factored in our assumptions, right, in terms of pilot availability and roster availability for 4Q?
Yes.
I want to better understand your guidance for Q4. In your capacity guidance of 10%, is it fair to assume that your domestic capacity will not grow, all the growth will come in your international capacity? And similarly, in your revenue per unit guidance, is it fair to assume that you have not assumed the fair caps being removed for the entire quarter?
As has been in the past quarters, the growth is going to be much larger on the international side. There is some growth that we've considered in the domestic side. But a disproportionate amount of growth related to the capacity guidance is towards international, which is in line with what the earlier quarters have also been. On guidance on the PRASK side, it does factor in the cap that is in play today.
My question is primarily on foreign exchange. In the previous call, Pieter mentioned that our overseas operations will partially offset the foreign exchange fluctuation, the rupee dollar fluctuation, and the hedging part. So, what was the difference of adding these 2 against what we call the foreign exchange fluctuation? What was the percentage difference we had?
Let me tell you what we are doing because we talked about the foreign exchange exposure that continues to grow. Today, we've got a U.S. dollar exposure close to $10 billion, largely consisting of all the aircraft that we've taken as well as our maintenance obligation. Step one was we've started to hedge, which we have already shared. We had a $1 billion hedge program that was in play. We scaled that up to now $3 billion. So, we'll now start hedging ourselves. We were hedging for the next 12 months. We'll extend the tenure so that we are able to hedge up to $3 billion. The second step that we've already taken, use the cash that we have to start acquiring the aircraft. That, in a way, also limits any further exposure that you carry on the dollar side. The third element is growth of our international operations because that also kind of creates a natural hedge.
The question that I had was more focused on the guidance for CASK ex-fuel ex-forex for the full year as in it implies a fairly large Y-o-Y growth in the fourth quarter. So, could you elaborate on which line items are actually driving this change in guidance? And are there any one-off effects such as rejoining bonuses that one needs to strip out?
This is a continued guidance that was given at the beginning of the year. We've been scaling that guidance upwards. When we had given a guidance, it's going to be flat to 2025. In the earlier quarter, we had guided that this is already trending upwards for the reasons because FX exposure continues to be higher. So, the dollar-denominated expenses are becoming costlier. We mentioned that damp leases are also which were supposed to taper off, given the AOG situation would have improved. It is going to come back. The impact on the CASK is going to be more driven by the capacity being moderated downwards. So, it's not exclusively on the fourth quarter. The guidance for the total year is going to be somewhere on the mid-single digit year-over-year. The drivers are: increased cost because of escalation, increased costs because of FX, offset by reduced damp leases that we had anticipated, which is not taking shape.
On the slots that have been taken by DGCA. Just wanted to understand that, our understanding that this is a temporary loss of slots and by default they are available to be bid for in the summer schedule? Or will the final authority over here will be whatever DGCA says on these slots?
If airlines are not operating certain slots, it is the duty of the airline to hand back unutilized slots arising out of non-utilization or planned cancellations. And we know what our plan is now for the next 2 months. So, we are handing the slots back. The reallocation of those slots is the prerogative of the airport, and that will be part of further sort of evaluation going forward on how that exactly will play out. I think it's the airports who are handing out the slots, to the best of my knowledge.
Going back to FDTL, given that new FDTL norms means increased requirement of number of pilots, do you expect the growth could slow down going ahead? You've been expecting 1 aircraft per week and 52 aircrafts per year. Do you think that growth will continue or do you think generally the growth would slow down because of the new FDTL norms and pilot hiring is any which way a big challenge?
We have a long-term and continuous update of our pilot reviews. That includes the longer-term fleet planning, including that flow of pilots. There's always an influx and an outflux of pilots, and that's the balance. We have not made any changes in our long-term ambitions and our long-term growth plans, we mentioned earlier, that's by now 1.5 years back to double in size by the end of the decade. The planes orders are there, and we are planning accordingly. So, the growth will continue as planned. There's always going to be quarter-over-quarter variations in terms of seasonality, airport capacity, geopolitical dimensions. If there's new opportunities, IndiGo will step in. So, we're fully committed to our plans, our growth and our future.
Just one question on the pilot side. As of FY '25, our pilot count was 5,400. But the document that was published yesterday, which essentially mentions that we are on track to kind of beat the revised schedule, and we have the desired pilot availability. The count mentioned over there was about 4,600-odd. So, if you can just explain this a bit?
What probably you have seen is account of the Airbus line-ready pilots. Alongside that, there are other pilots that operate our ATRs also. So, if you add up those, you'll probably get to the number that you're talking about. So, this one is excluding the ATR and this was only for the line-ready pilots database. So, we've got more pilots than the number that you quoted. The one that you quoted initially is a consolidation of line-ready pilots, pilots which are with us but are not flying and then the ATR pilots also.