U.S. Markets closed

Edited Transcript of INDIGO.NSE earnings conference call or presentation 24-Oct-19 11:30am GMT

Q2 2020 Interglobe Aviation Ltd Earnings Call

GURGAON Oct 29, 2019 (Thomson StreetEvents) -- Edited Transcript of Interglobe Aviation Ltd earnings conference call or presentation Thursday, October 24, 2019 at 11:30:00am GMT

TEXT version of Transcript

================================================================================

Corporate Participants

================================================================================

* Aditya Pande

InterGlobe Aviation Limited - CFO

* Ankur Goel

InterGlobe Aviation Limited - Associate VP of Treasury & IR

* Ronojoy Dutta

InterGlobe Aviation Limited - CEO

* William Boulter

InterGlobe Aviation Limited - Chief Commercial Officer

* Wolfgang Prock-Schauer

InterGlobe Aviation Limited - President & COO

================================================================================

Conference Call Participants

================================================================================

* Achal Kumar

HSBC, Research Division - Analyst

* Ansuman Deb

ICICI Securities Limited, Research Division - Aviation Analyst

* Binay Singh

Morgan Stanley, Research Division - Executive Director

* Charles Cartledge

Sloane Robinson LLP - Partner

* Deepika Mundra

JP Morgan Chase & Co, Research Division - Research Analyst

* Lokesh Garg

Crédit Suisse AG, Research Division - Research Analyst

* Miten Lathia

HDFC - Fund Manager

* Pulkit Patni

Goldman Sachs Group Inc., Research Division - Equity Analyst

* Sonal Gupta

UBS Investment Bank, Research Division - Director and Research Analyst

================================================================================

Presentation

--------------------------------------------------------------------------------

Operator [1]

--------------------------------------------------------------------------------

Good evening, ladies and gentlemen, and welcome to IndiGo's conference call to discuss the second quarter fiscal year 2020 financial results. My name is Ali, and I will be your coordinator. (Operator Instructions) As a reminder, today's conference call is being recorded.

I would now like to turn the call over to your moderator, Mr. Ankur Goel, Head of Investor Relations for IndiGo. Thank you and over to you, sir.

--------------------------------------------------------------------------------

Ankur Goel, InterGlobe Aviation Limited - Associate VP of Treasury & IR [2]

--------------------------------------------------------------------------------

Good evening, everyone, and thank you for joining us for the second quarter fiscal year 2020 earnings call.

We have with us our Chief Executive Officer, Rono 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 Willie Boulter, our Chief Commercial 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 uploaded subsequently.

With this, let me hand over the call to Rono Dutta.

--------------------------------------------------------------------------------

Ronojoy Dutta, InterGlobe Aviation Limited - CEO [3]

--------------------------------------------------------------------------------

Good evening, everyone, and thank you for joining us on this call.

We reported a net loss of INR 10.6 billion in a seasonally weak quarter for the industry. While we had a much better revenue performance during the quarter, the loss was driven by certain cost headwinds. These costs fall into 3 major categories: number one, mark-to-market loss due to capitalization of operating lease liabilities; two, reassessment of accrual estimates for future maintenance costs; and three, onetime adjustment owing to adoption of lower tax rates. Let me stress that each of these cost items is noncash in nature and does not reflect on the cash flows we generate. Excluding the impact of these cost items, our loss before tax would have been INR 2.8 billion, a significant improvement over the INR 9.9 billion we posted in the same period last year.

Over the half year ended September 2019, post- servicing our debt and lease obligations, we have generated a very healthy cash flow of INR 33 billion through our operating activities, which clearly demonstrates the strength of our business and our company. Our CFO, Aditya Pande, will go into detail on each of these items.

Now let me speak to the fundamental operating metrics of the quarter. We continue to see a year-over-year improvement in unit revenues. And this quarter, we reported a 5.7% increase. Our rapid expansion into both domestic and international markets has been very impressive. We opened 7 new domestic stations and 6 new international markets.

Frankly, I'm personally staggered by what IndiGo employees have been able to achieve in this regard. When I set a target for the opening of 2 China stations, 2 Vietnam stations, 1 Myanmar station, 1 Saudi Arabia station plus 35 additional frequencies into international markets, I was hesitant as to whether I was demanding too much from the organization.

Think of all that it takes to operate into a new country or even to add a new frequency. There are the regulatory hurdles, slots at airports, crew familiarization flights, ground handling contracts, sales agreements, PR initiatives and much more. The fact that IndiGo employees were able to achieve over 100% growth rate in the international market in so compressed a time period I think is a real testimony to the quality of this organization.

Cargo has maintained its rapid growth during the quarter in both domestic and international sectors. As per the DGCA reports, we now have a 39% market share in the domestic cargo business, a significant increase from the 28% we had in the same period last year. Our international cargo capacity has grown by more than 80% on a year-over-year basis. We are now also focusing on inbound cargo business from Southeast Asia and Middle East, and I'm very pleased with the response we're getting on these sectors.

During the quarter, IndiGo was awarded the Best Domestic Airline at FICCI's first edition of Travel and Tourism Excellence Awards. These awards motivate all of us at IndiGo to keep pushing the bar and set higher standards. We are putting a lot of emphasis on improving our service standards. There are 2 avenues that we use to identify and track areas of improvement. The first avenue is customer feedback on which we spend a lot of management time and attention in analyzing and identifying root causes. The second avenue is the Net Promoter Score, which organizations around the world are using. I'm pleased to say that our NPS scores compare favorably with most of the low-cost carriers around the world.

Now looking forward to the next quarter. The revenues during the festive season have been somewhat subdued. At this time, we are expecting a flattish year-over-year unit revenue performance. Please note that it's still early in the quarter and things will of course change, and we take no responsibility to further update our revenue forecast before the next earnings release.

We are seeing declines in yield in metro-to-metro markets, where low-cost capacity has replaced former Jet Airways capacity. We are seeing stronger performance in markets where Jet was not previously present. On international markets, despite a significant increase in capacity, our unit revenues are holding up rather well, with China in particular performing well ahead of plan.

On our capacity guidance, we expect a year-over-year capacity increase in terms of ASKs of 22% for the third quarter of this fiscal year. For the full year, we expect capacity increase of 25%.

As you're all well aware, Aditya Pande joined us as the new Chief Financial Officer. Aditya has vast experience spanning across more than 2 decades in several blue-chip organizations, and we are excited to have Aditya as part of our team.

Now let me hand over the call to Aditya to discuss the financial performance in detail.

--------------------------------------------------------------------------------

Aditya Pande, InterGlobe Aviation Limited - CFO [4]

--------------------------------------------------------------------------------

Thank you, Rono, and good evening, everyone.

For the quarter ended September 2019, we reported a net loss of INR 10.6 billion with a negative after-tax profit margin of 13.1% compared to a net loss of INR 6.5 billion with a negative tax -- after-tax margin of 10.5% during the same period last year. We reported an EBITDAR of INR 2.6 billion with an EBITDAR margin of 3.2% compared to an EBITDAR of INR 2.2 billion with an EBITDAR margin of 3.6% during the same period last year.

As Rono mentioned, the lower profitability was mainly contributed by mark-to-market loss due to capitalization of operating lease liabilities, reassessment of accrual estimates of future maintenance costs, and onetime adjustment owing to adoption of lower tax rates.

Let me discuss each one of these 3 factors in detail. As you would know that we have capitalized the operating lease liabilities as per the new accounting standard, Ind AS 116. These liabilities are dollar denominated. Hence, they are subject to mark-to-market every quarter. Since during the quarter, rupee depreciated from INR 68.90 per U.S. dollar to INR 70.71 per U.S. dollar, we had a negative impact of INR 4.3 billion on mark-to-market of our capitalized operating leases.

If you recall, we have mentioned previously that we are experiencing a maintenance bubble because of ceo engines. We extended the lease of most of our existing ceo beginning 2016 and also got around 50 used aircraft from secondary market. As a result of this, the engines of these older aircraft are undergoing second shop visits, which are significantly more expensive than the first shop visits. These second shop visits resulted in maintenance spikes in our cost.

During the quarter, we have carried out the reassessment of accrual estimates for heavy maintenance and overall cost of engines. Accordingly, we provided INR 3.2 billion under supplementary rentals and aircraft maintenance costs. This reassessment is confined to our older ceo aircraft. This cost should continue to be in a similar range for the next couple of quarters. This maintenance cost should eventually go away around 2022 as the neos become a larger portion of our fleet and these older ceo planes are redelivered.

The government has announced an option for corporates wherein tax rate is reduced from 35% to 25.2%, a tax reduction of 9.8%. In addition, the companies adopting the same will not be required to pay minimum alternate tax, or MAT, going forward. We have decided to adopt the new lower tax rates. This lower tax -- this will lower our effective tax rate, and we will no longer be required to pay MAT, which will result in lower cash tax outflow.

The key highlights of our performance during the quarter can be best summarized by the following points. Our capacity grew by 24.2% on a year-over-year basis. Our revenue from operations in September quarter was INR 81.1 billion, an increase of 31% on a year-over-year basis. Our RASK for the quarter was INR 3.42 compared to INR 3.23 during the same period last year, an increase of 5.7%. For the quarter, our yield increased by 9.4% to INR 3.52 while the load factors were down by 0.9 points to 83.5%. Our fuel CASK decreased by 17.3% compared to 8.7% decrease in ATF prices on a year-over-year basis.

Fuel was a very good story for us. We are seeing a much faster decrease in fuel CASK compared to decrease in fuel prices primarily driven by fuel savings from the new aircraft. Further, our international operations has also helped us to reduce our fuel costs, both because of lower taxes and higher stage length. We have also taken a number of operational initiatives, which has contributed to a lower fuel CASK number.

Our CASK for the quarter was INR 3.85 compared to INR 3.74 during the same period last year, an increase of 2.8%. Our CASK ex-fuel was INR 2.56, an increase of 17.2% from the same period last year. Excluding the impact of mark-to-markup -- mark-to-market loss on capitalized operating lease and reassessment of accrual estimates of future maintenance costs, our CASK ex-fuel would have increased 3.1%. This CASK increase was primarily driven by higher employee costs and lower aircraft utilization. While we have little control over the depreciation of the Indian rupee, we definitely see some areas of improvement in our CASK ex-fuel in the coming quarters.

For the quarter, our employee costs were higher by 56% compared to same period last year. As stated during the previous conference call as well, the higher employee cost is because of around 600 pilots being under training, in-sourcing of ground handling at most of our domestic airports to our wholly owned subsidiary, Agile Airport Services Private Limited, and salary hikes. We expect the impact of these pilots under training to be negative 2.3% on our CASK ex-fuel. We expect the employee cost for us to start going down from the second half of the year onwards as these pilots complete their training and start flying.

Secondly, similar to previous quarter, we continue to hold certain aircraft in reserve awaiting clarity on allocation of Jet Airways' slots. As a result, our aircraft utilization was lower by around 9% compared to the same period last year. We estimate that lower aircraft utilization contributed to 2.7% in the increase of CASK ex-fuel.

--------------------------------------------------------------------------------

Ronojoy Dutta, InterGlobe Aviation Limited - CEO [5]

--------------------------------------------------------------------------------

Let me take over while he clears his throat for a minute. So let me start again on the last sentence. We estimate that lower aircraft utilization contributed to 2.7% in the increase of CASK ex-fuel. We expect the aircraft utilization to increase and translate into better CASK ex-fuel performance.

Our balance sheet continues to remain strong. Our cash balance at the end of the period was INR 187 billion, comprised of INR 87 billion of free cash and INR 100 billion of restricted cash.

The capitalized lease liability as of 30th September 2019 was INR 175 billion. Our total debt, including the capitalized lease liability, was INR 198 billion.

And with that, let me hand it back to Ankur.

--------------------------------------------------------------------------------

Ankur Goel, InterGlobe Aviation Limited - Associate VP of Treasury & IR [6]

--------------------------------------------------------------------------------

Thank you, Rono.

(Operator Instructions) And with that, we are ready for the Q&A.

================================================================================

Questions and Answers

--------------------------------------------------------------------------------

Operator [1]

--------------------------------------------------------------------------------

Ladies and gentlemen, we will now begin the question-and-answer session. (Operator Instructions) The first question is from the line of Deepika Mundra from JPMorgan.

--------------------------------------------------------------------------------

Deepika Mundra, JP Morgan Chase & Co, Research Division - Research Analyst [2]

--------------------------------------------------------------------------------

The first question is regarding the ASK growth guidance. It's considerably lower as to what you had guided to earlier. Is this because of aircraft delivery issues? Or is it just that because of a weak environment, you are postponing deliveries?

--------------------------------------------------------------------------------

Ronojoy Dutta, InterGlobe Aviation Limited - CEO [3]

--------------------------------------------------------------------------------

No. But it's not because of the weak environment. So looking backwards, the reason why we were softer in terms of ASK growth, as I said, is because of the Jet slot issues. So this is affecting sort of September -- August and September. When -- we knew that we would get various landing rights and slots and bilaterals, but they all kept getting delayed. So there are a couple waiting for -- okay, okay, next week, we'll get it, and it didn't happen. So that was, looking backwards, why we were soft.

Looking forward, though, the softness is because of aircraft delivery issues.

--------------------------------------------------------------------------------

Deepika Mundra, JP Morgan Chase & Co, Research Division - Research Analyst [4]

--------------------------------------------------------------------------------

Could you just elaborate as to what is the delivery issue?

--------------------------------------------------------------------------------

Ronojoy Dutta, InterGlobe Aviation Limited - CEO [5]

--------------------------------------------------------------------------------

So I'll let Wolfgang Prock-Schauer take that.

--------------------------------------------------------------------------------

Wolfgang Prock-Schauer, InterGlobe Aviation Limited - President & COO [6]

--------------------------------------------------------------------------------

Yes. Hello. So basically, our delivery stream, and this was planned for the next year, is that the growth rate is coming down anyhow because we used to get something like 6 aircraft per month. Now this growth rate is expected to come down. This is one element. And also, we have certain delays in our aircraft deliveries coming, which may be in the range of 3 to 4 months. So this also reflected the pressure a bit in our growth going forward for the next year. So these are the main elements of it. But it doesn't change our fundamental growth strategy going forward.

--------------------------------------------------------------------------------

Operator [7]

--------------------------------------------------------------------------------

The next question is from the line of Binay Singh from Morgan Stanley.

--------------------------------------------------------------------------------

Binay Singh, Morgan Stanley, Research Division - Executive Director [8]

--------------------------------------------------------------------------------

Just actually, tagging in on the earlier question. So what sort of a growth are you looking next year in ASK?

--------------------------------------------------------------------------------

Ronojoy Dutta, InterGlobe Aviation Limited - CEO [9]

--------------------------------------------------------------------------------

By next year, you mean the -- okay. The following year, I don't have that number. It will be around 25%, roughly.

--------------------------------------------------------------------------------

Binay Singh, Morgan Stanley, Research Division - Executive Director [10]

--------------------------------------------------------------------------------

Okay. And just one question. Like on supplementary rentals, repair and maintenance, we've seen that number move up quite sizably from INR 10 billion to INR 15 billion. And in your remarks, you mentioned that around INR 3.2 billion is basically sort of a charge for the older engines. So, a, this INR 3.2 billion number -- so in a way, are you saying that the INR 3.2 billion number will continue in the coming quarters, so the supplementary rentals and repairs and maintenance as a percentage of ASK will remain at these levels?

--------------------------------------------------------------------------------

Aditya Pande, InterGlobe Aviation Limited - CFO [11]

--------------------------------------------------------------------------------

Yes. So we expect the -- this is Aditya. We expect the supplementary rentals to remain at similar levels for the next quarter and the quarter after. And as I said earlier, this is primarily because of the second shop visits that we're seeing on these older ceo aircrafts that we have.

--------------------------------------------------------------------------------

Ronojoy Dutta, InterGlobe Aviation Limited - CEO [12]

--------------------------------------------------------------------------------

And I think we also mentioned, we'll return a bunch of these ceo aircraft by 2022. So after that, this engine maintenance cost will show a decline.

--------------------------------------------------------------------------------

Binay Singh, Morgan Stanley, Research Division - Executive Director [13]

--------------------------------------------------------------------------------

And the INR 33 billion number that you shared on cash flow, is that your operating cash flow for like this quarter? Or like what was that INR 33 billion number earlier in the opening remark?

--------------------------------------------------------------------------------

Aditya Pande, InterGlobe Aviation Limited - CFO [14]

--------------------------------------------------------------------------------

It's on a 6-monthly basis. This is for the half year.

--------------------------------------------------------------------------------

Binay Singh, Morgan Stanley, Research Division - Executive Director [15]

--------------------------------------------------------------------------------

So that is a cash profit on 6-monthly basis. Okay.

--------------------------------------------------------------------------------

Aditya Pande, InterGlobe Aviation Limited - CFO [16]

--------------------------------------------------------------------------------

Yes.

--------------------------------------------------------------------------------

Operator [17]

--------------------------------------------------------------------------------

The next question is from the line of Ansuman Deb from ICICI Securities.

--------------------------------------------------------------------------------

Ansuman Deb, ICICI Securities Limited, Research Division - Aviation Analyst [18]

--------------------------------------------------------------------------------

I just wanted a little bit more clarification on this maintenance cost. So FY '20, remaining 2 quarters, we have -- we'll have this elevated supplementary cost. In FY '21, we will have a run rate which is lower than this. And then in FY '22, we would have a more neo fleet, which should kind of not give the supplementary entities. Is that the right understanding?

--------------------------------------------------------------------------------

Aditya Pande, InterGlobe Aviation Limited - CFO [19]

--------------------------------------------------------------------------------

Yes. That's directionally the correct understanding. It is in -- for the current year, we continue to be -- we'll remain in a similar range. '21, that number should start reducing. And starting '22 as the -- ceos actually start declining starting next year. But as they start going out in higher volume in '22, these numbers will start coming down.

--------------------------------------------------------------------------------

Ansuman Deb, ICICI Securities Limited, Research Division - Aviation Analyst [20]

--------------------------------------------------------------------------------

So when we are providing for this number, are we paying these supplementaries on it on a shop visit basis or we are providing it upfront?

--------------------------------------------------------------------------------

Aditya Pande, InterGlobe Aviation Limited - CFO [21]

--------------------------------------------------------------------------------

Yes. So we provided in our books. And we paid once the engine visits the shop and we get the bill from the MRO in terms of what that particular cost is for that, these maintenance costs are we talking about, heavy maintenance.

--------------------------------------------------------------------------------

Operator [22]

--------------------------------------------------------------------------------

The next question is from the line of Achal Kumar from HSBC.

--------------------------------------------------------------------------------

Achal Kumar, HSBC, Research Division - Analyst [23]

--------------------------------------------------------------------------------

Yes. So I want to understand 2 things. One is about your stance on Air India international operations. You said that you're still interested in international operations if it comes. So what is your stand on that? And when we talk about Air India separately, you also said that you are interested in wide-body. So where are you on that? If you could please clarify on those.

--------------------------------------------------------------------------------

Ronojoy Dutta, InterGlobe Aviation Limited - CEO [24]

--------------------------------------------------------------------------------

Those are all great questions to which we do not have definitive answers. They're all subject matter of great interest. So we talk about it in various management forums, and we do not have something to declare or announce as a yes or no. We recognize that we are at a point of our evolution where we have to think of longer-range aircraft. But beyond that, really, I don't have much to share at this point.

--------------------------------------------------------------------------------

Achal Kumar, HSBC, Research Division - Analyst [25]

--------------------------------------------------------------------------------

Okay. Fine. Then other thing I wanted to understand very quickly on this maintenance cost, which you said INR 3.2 billion, is that -- would that be impacted by the ForEx? I mean so the ForEx will definitely -- so is it paying royalty and then definitely, it will be impacted by ForEx? Is that correct?

--------------------------------------------------------------------------------

Aditya Pande, InterGlobe Aviation Limited - CFO [26]

--------------------------------------------------------------------------------

No. So we have provided for those in our books. And obviously, these bills are raised in foreign exchange. But it's no different than it's been done in the past. I mean in the past, we have always operated on the principle that we pay the bill as we get it from the MRO. So it's always a dollar-denominated bill, will continue to be a dollar-denominated bill.

--------------------------------------------------------------------------------

Achal Kumar, HSBC, Research Division - Analyst [27]

--------------------------------------------------------------------------------

So that will have an impact from the ForEx rate?

--------------------------------------------------------------------------------

Aditya Pande, InterGlobe Aviation Limited - CFO [28]

--------------------------------------------------------------------------------

Yes, yes. Yes, it would.

--------------------------------------------------------------------------------

Achal Kumar, HSBC, Research Division - Analyst [29]

--------------------------------------------------------------------------------

Okay. Sorry, last two questions. One is on the engine side. So recently, I think that [BGC], he had said -- disclosed something that you cannot fly a few particular engine after a specific time period. So how that will impact IndiGo?

And secondly, on the international operations, you said that your international operations are doing great, especially China. So I just want to understand, overall, as a unit, as an international operations, how you're doing. And why I'm asking is because I was traveling in one of your flights in Calcutta-Hong Kong, and I saw just 30 passengers on board, 20, 30. So -- and then you discontinue this flight probably because of tension in Hong Kong.

So overall, I wanted to understand, is that particular case with Hong Kong? Or how you are experiencing overall international operations?

--------------------------------------------------------------------------------

Ronojoy Dutta, InterGlobe Aviation Limited - CEO [30]

--------------------------------------------------------------------------------

So I'll address the international issue and then Wolfgang will pick up on the engine issue. So international, you're right. Hong Kong was doing badly. I guess it was doing badly for everyone with all the unrest there. So we have discontinued it. International, we're very pleased with the results. And international is on a different -- somewhat different cycle seasonally to domestic. So it has its own swings up and down, but the Middle East is very strong. As I said, China is strong. Hong Kong is an area of weakness.

And we started some flights, unfortunately, not by choice, but by necessity, with a very short time window. And I'm thinking of places like Vietnam and so forth. We had to -- it took us a long time to get all the approvals, which I talked about before, the regulatory hurdles, et cetera, et cetera. And we had a certain date. We had to start by October given the fact that after that, there's a whole new slot season, as you know.

So some of those international markets with very short time windows for booking. International typically has a 90-day booking window, and we were starting flights with like a 30- to 45-days-before window. Some of those flights didn't get the full benefit of the booking. But overall, we are very pleased with our international profitability.

And with that, I'll give it to Wolfgang.

--------------------------------------------------------------------------------

Wolfgang Prock-Schauer, InterGlobe Aviation Limited - President & COO [31]

--------------------------------------------------------------------------------

Yes. Thank you. On the engine, we can see overall -- significant improvement in trends. For example, in the key -- the key event is [naturally] an in-flight shutdown. This rate has come down to 0.01 per thousand engine flight hours. So very low. And just to put it in perspective, the regulatory requirements in FAA, for example, or in [other] is 0.05. So 5x as high. So we are well within the regulatory limits of the required, let's say, efficiency and reliability of the engines.

And basically, most of the -- many of the issues have been fixed. There are 3 main issues remaining, which we are still on -- very on good track. One is the third stage, low-pressure turbine where all IndiGo's -- all our aircraft are delivered in May 2019 onwards using new material. So -- and there is no time limit for us. So all the aircraft will be delivered, and we have time to change all this, place new material.

Main gear box, it is fixed. There was a required software change, which is done already. And the last element of the #3 is a transient vibration, which is a -- in the nature of this engine, which happens. And all regulatory authorities outside India have a requirement. If it's below a certain threshold, there's no maintenance activity required. We, however, have taken a more cautious approach and we're fulfilling that.

So there's no [further here. I've heard] from your questions that there might be some limits you're having. We continue with all our deliveries. We have no limitations. However, there's one limitation I want to mention, extended range operations where you have an airport [outside]. Right now, we operate -- every airport must be reachable on our flight track within 60 minutes.

For neo aircraft, we can't use that. We can't use extended range, which goes up to 120 minutes. So our international operation will be -- we have to provide a, let's say, more restricted route, which we are doing. And as soon as EDTO, extended range operation, is allowed and gets approval, we can then have all the flexibility. And it is for aircraft -- new aircraft abroad, it is allowed. So we think that we will get this extension, EDTO extension in the next year or so.

--------------------------------------------------------------------------------

Operator [32]

--------------------------------------------------------------------------------

The next question is from the line of Miten Lathia from HDFC Mutual Fund.

--------------------------------------------------------------------------------

Miten Lathia, HDFC - Fund Manager [33]

--------------------------------------------------------------------------------

Just wanted to understand the disconnect between the cash profits and the operating cash flow. So while your free cash has gone up by about INR 4,300 crores on a 1-year basis and even you suggested that there was an operating cash flow of INR 3,400 crores in the first 6 months of this financial year itself, when we look at the P&L, that is hardly half of that is cash profit. So I just wanted to sort of identify that one big item which is causing this disconnect between the P&L and the cash flow. And the cash flow statement has been given, but somehow it's not very [apparent].

--------------------------------------------------------------------------------

Aditya Pande, InterGlobe Aviation Limited - CFO [34]

--------------------------------------------------------------------------------

Yes. I mean let me try and walk you through that. I mean our cash balances increased during the half year primarily driven by cash from operations, which, you're correct, is one big driver, our increase; and [therefore, the] incentives that we get from our vendors; and increase in our working capital. Our forward sales have been -- we were strong in the -- as we looked at the end of September. So those give us the large cash flow impact. Now that was partially offset by repayment of our lease liabilities, purchasing down [supposed] equipment and paying dividend for the quarter. But those are the key drivers.

--------------------------------------------------------------------------------

Miten Lathia, HDFC - Fund Manager [35]

--------------------------------------------------------------------------------

Understood. And if I can sort of understand the accounting impact of the FX fluctuation on lease liability. So right now, there is an INR depreciation and you have passed it through the P&L. And that -- because that amount is payable to nobody, it just goes and increases your lease liability on the balance sheet. Is that how it works?

--------------------------------------------------------------------------------

Aditya Pande, InterGlobe Aviation Limited - CFO [36]

--------------------------------------------------------------------------------

So basically, what happens is that as per the new accounting rules, we're required to take a charge on a mark-to-market basis. Now this is neither a payout to anybody nor is it ever impacting any of our metrics in any way. Because what happens eventually is that when you end up paying the bill, which is in foreign exchange, in either our lease liabilities or anything that you're paying, at that time, we have a realized FX loss at that point. So in some ways, it's just showing you a notional number that had the currency been at this level, what would your liabilities be. And therefore -- and the rules require us to run it through the P&L and therefore, it ends up as a charge to the P&L. So you're right, it is a noncash item.

--------------------------------------------------------------------------------

Miten Lathia, HDFC - Fund Manager [37]

--------------------------------------------------------------------------------

And sort of because it's noncash, would -- does it also increase the asset side commensurately? Or how does that work?

--------------------------------------------------------------------------------

Unidentified Company Representative [38]

--------------------------------------------------------------------------------

(inaudible)

--------------------------------------------------------------------------------

Aditya Pande, InterGlobe Aviation Limited - CFO [39]

--------------------------------------------------------------------------------

No. It doesn't increase the...

--------------------------------------------------------------------------------

Miten Lathia, HDFC - Fund Manager [40]

--------------------------------------------------------------------------------

It doesn't change the asset side at all. It basically hit on the P&L and increase in liability.

--------------------------------------------------------------------------------

Aditya Pande, InterGlobe Aviation Limited - CFO [41]

--------------------------------------------------------------------------------

Right, and..

--------------------------------------------------------------------------------

Miten Lathia, HDFC - Fund Manager [42]

--------------------------------------------------------------------------------

And how would it reverse itself? I mean because it's not -- let's say, the liability is not crystallized, how would it reverse itself?

--------------------------------------------------------------------------------

Aditya Pande, InterGlobe Aviation Limited - CFO [43]

--------------------------------------------------------------------------------

So this is a period item, right? I mean you state your liability at the level at which the rupee is at that point in time. As you get to the next period, there'll be a change upward, downwards and then again reflected through the P&L. So it'll keep on adjusting itself based on where the rupee ends at the end of that quarter. I mean you will settle it when you will settle it. I mean when you are really due to make that payment, that's when you will truly settle it.

--------------------------------------------------------------------------------

Miten Lathia, HDFC - Fund Manager [44]

--------------------------------------------------------------------------------

Okay. So if I could sort of put it other way, and I'm just extending the same question. So not a fresh question. Effectively, where revenue and costs would have been matched under the earlier accounting because any FX depreciation would have been in some form or the other passed on to the customer, [for you] effectively that link is broken, the revenue and expense is no longer matched because even your future liability, you have sort of taken into your current expense.

--------------------------------------------------------------------------------

Aditya Pande, InterGlobe Aviation Limited - CFO [45]

--------------------------------------------------------------------------------

Right. You take it to your current expense, you route it through your liabilities. And then every quarter, you adjust it. If you want a slightly detailed walk-through on that, we can have that provided through Ankur. It's not a problem at all.

--------------------------------------------------------------------------------

Operator [46]

--------------------------------------------------------------------------------

The next question is from the line of [Pha Vinti] from [Samitia] Capital.

--------------------------------------------------------------------------------

Unidentified Analyst [47]

--------------------------------------------------------------------------------

Yes. So you mentioned that you have had difficulty obtaining some approvals. And I think it's common knowledge that SpiceJet has gotten a lot of important slots for Mumbai, Delhi, and some other important routes. So there seems to be some sort of irregular approach by the government in this whole matter. Do you -- I mean how do you plan to address that with the government?

--------------------------------------------------------------------------------

Ronojoy Dutta, InterGlobe Aviation Limited - CEO [48]

--------------------------------------------------------------------------------

So let me just clarify. When -- I think I mentioned that we were in a sort of holding pattern for a while, while the government was sorting through how do we deal with this issue. So Jet had many foreign bilaterals, for example. Who gets what? So the ministry spent some time deciding that. And while they were deciding that, we were on hold with [the one] aircraft. So that's one issue.

The other issues that you're referring to is how was the final outcome, what were the sort of winners and losers in this. And we can share with you a number. Overall, I'd say, we did pretty well in Delhi while SpiceJet is doing better in Mumbai.

And I'll ask Wolfgang to give you the exact slot count. If you would, Wolfgang.

--------------------------------------------------------------------------------

Wolfgang Prock-Schauer, InterGlobe Aviation Limited - President & COO [49]

--------------------------------------------------------------------------------

Yes. So if I refer to the domestic slots, we got additional 22 slots in [tiles], and we got additional slots for domestic in Mumbai, which was less. Sorry, this is correct. 157, 179 is 22. So yes, 22 in Delhi and slightly less in Mumbai. And if you look at the absolute figures, basically, what has happened, SpiceJet and IndiGo got the same amount in absolute figures, whereas our position was that we, as the bigger carrier, should have gotten a higher share, but it was done as it was done. It was a special SOP which was implemented, which gave Spice and IndiGo the same amount of additional slots in these big -- 2 big cities.

And a similar thing has happened on the bilateral rights, where SpiceJet and IndiGo got the same amount approximately of a [rate up] of traffic rights because of this stop of operation of Jet Airways. So we took it as it is. But we believe that with our capacity coming in and our operational capabilities, we eventually will get the -- our fair share of these additional resources which are available going forward.

--------------------------------------------------------------------------------

Unidentified Analyst [50]

--------------------------------------------------------------------------------

Okay. And in the second quarter, you generated additional free cash flow of about, I guess, INR 1,000 crores. Now could you tell us in third quarter, knowing where the fares -- whatever you've seen until the -- this date in October and knowing what you know about your costs and assuming that those factors don't change and fuel prices don't change much, what can we expect in terms of free cash flow for third quarter?

And I'm asking this question because there are very -- a large number of moving parts in the second quarter results. It's impossible to put [head and tails] together and kind of figure out because your spread is very negative, yet you have good reasonable free cash flow generation. So how does one think about free cash in the next quarter?

--------------------------------------------------------------------------------

Ronojoy Dutta, InterGlobe Aviation Limited - CEO [51]

--------------------------------------------------------------------------------

So let me tell you what we can forecast with some degree of confidence and what we can't. And so we know roughly that the market is softening. There's no question about that. We were on a pretty good growth path in terms of revenue, 5.7% this quarter. I think the quarter before that, we did even better. As we've said in our remarks, we now think it'll be flat. So there's some softening in the marketplace.

We've told you that our maintenance cost will be roughly the same next quarter. We think aircraft utilization will improve a little, and that will help our CASK. Fuel, we don't really know. But beyond that, we also can't put all the numbers together and tell you, ha, this is what the net-net cash flow will be. That is going too far into the future, which none of us has the capability of forecasting that accurately.

--------------------------------------------------------------------------------

Unidentified Analyst [52]

--------------------------------------------------------------------------------

But it is -- is it fair to say that some of these onetime adjustment items that you had in second quarter, such as, for example, additional supplement rental and the whole -- the change in accounting, that won't be there in third quarter vis-à-vis second quarter? So then we are sort of back to more of the normal, that the line items and changing those with respect...

--------------------------------------------------------------------------------

Ronojoy Dutta, InterGlobe Aviation Limited - CEO [53]

--------------------------------------------------------------------------------

But as we've said before, we do expect our maintenance cost to remain elevated for the next 2 quarters. So we don't see a decline in maintenance cost. That continues, as we said, to 2022, when it goes down.

--------------------------------------------------------------------------------

Unidentified Analyst [54]

--------------------------------------------------------------------------------

Yes. But the -- but you took onetime charge in your -- that relate to an increase in supplement rental. That's related to your future cost and similar to the FX. It's a future cash cost, but you have -- obviously, you've booked it in accounting in the P&L for a onetime basis. So that results in a significant deviation in the accounting number and the cash flow number. What I'm saying, though, is from first quarter to second quarter, such big deviation won't be there. Is that fair to say?

--------------------------------------------------------------------------------

Aditya Pande, InterGlobe Aviation Limited - CFO [55]

--------------------------------------------------------------------------------

So we will continue to accrue these costs based on when do we need to send these engines for shop visits. So that accrual will continue, but these engines will also then start visiting the shop as well. So the accrual will then get knocked off against the actual expense. So we will see the accrual build up, and then we will see the engines going into the shop visit where this will effectively get knocked off on accrual that we've created. It's a noncash charge, you're right. But as and when these machines or as when these engines go for the shop visit, we will end up paying the MRO for the services provided.

--------------------------------------------------------------------------------

Operator [56]

--------------------------------------------------------------------------------

The next question is from the line of Charles Cartledge from Sloane Robinson.

--------------------------------------------------------------------------------

Charles Cartledge, Sloane Robinson LLP - Partner [57]

--------------------------------------------------------------------------------

My first question is in the last quarter or maybe the last 2 quarters, you talked about self-help improving your yields by about 5%. Could you update us on that?

And secondly, in the broader environment, you say the market's softening. I'd just like to understand that a bit better because the overall ASKs for India are in the low single digit; and one would have thought that underlying demand might be such that we saw overall yields increase, but I'm sort of getting a different message.

And if I may, the third point on your aircraft deliveries. I think earlier in the call, you said that there were some delays. Is that -- are these delays outside of your control then? Are they Airbus-type delays? And could you elaborate on that?

--------------------------------------------------------------------------------

Ronojoy Dutta, InterGlobe Aviation Limited - CEO [58]

--------------------------------------------------------------------------------

Yes. So first, on the self-help issue. We said earlier in the year that we are doing certain things in network optimization, in our revenue management, sales initiatives, et cetera, which should give us a 5% boost in unit revenue, over and above the industry trend. So basically, we're saying we're stealing revenue share, if you will, over and above our capacity share. We see that continuing.

And as you can see, this quarter again, we saw that 5% boost in unit revenue. We'll have to see how the industry does as the rest of the quarter unfolds. We are actually convinced that that will continue into the third quarter. So the question is how is the industry going to do? No matter what the industry does, we'll do 5% better, we think. But the industry itself, we see the softening.

And let me tell you that there was a little bit of a sort of tipping point, if you will, come this festive season and starting in September. So July, August were good, strong months. We were quite confident of what was going on. September, we started seeing some weakening. And we thought, but wait, September is always weak. So it was difficult to sort of separate the seasonal weakness from any economic weakness.

And now October typically is a very strong month. And you may not be familiar, there are 2 big Indian holidays in October. The first is called Dussehra, the second is called Diwali. And generally, you don't see anyone coming out with sales during this period because the demand is so strong. This October was unusual. In the middle of Dussehra, the first festival, we had one of our competitors do a sale. And then, again, now we're in the middle of Diwali, and the second competitor does a sale. That says there is weakness, otherwise, why would all these sales be coming up? And of course, we are seeing it in our numbers as well. But I'm not trying to be like, "Oh, my god, things are really bad." Things are softening is all I'm saying.

So if -- looking at our actuals and our forecast, last quarter, we had a 5.7% unit revenue improvement. Right now, we are forecasting a flat unit revenue year-over-year. So that -- those are the first 2 points.

Your third point, I think, was about aircraft deliveries. The aircraft delivery delays are beyond our control. We are in no way pushing back delivery. If anything, we are hungry for more airplanes. There are a lot of routes we'd like to fly. And we are after Airbus and pounding the table, "Come on. Come on. Give us these planes."

Unfortunately, I think you'll see this all across the aviation industry worldwide. There seems to be a problem within the supply chain. And people talk of castings and forgings and those things are not available. So all engine manufacturers, all aircraft manufacturers seem to be struggling with keeping up with the demand. And so the aircraft deliveries are totally not of our own making.

--------------------------------------------------------------------------------

Operator [59]

--------------------------------------------------------------------------------

The next question is from the line of Sonal Gupta from UBS.

--------------------------------------------------------------------------------

Sonal Gupta, UBS Investment Bank, Research Division - Director and Research Analyst [60]

--------------------------------------------------------------------------------

Sir, just wanted to understand, one, in terms of the FX side. Like previously, we've indicated that the restricted cash would be now, you're moving more and more towards dollar-denominated. So I just want to understand where would be that percentage?

--------------------------------------------------------------------------------

Aditya Pande, InterGlobe Aviation Limited - CFO [61]

--------------------------------------------------------------------------------

So we are now 100% hedged for all our supplementary rent payments. So we don't carry any mark-to-market exposure as it relates to supplemental rentals going forward.

--------------------------------------------------------------------------------

Sonal Gupta, UBS Investment Bank, Research Division - Director and Research Analyst [62]

--------------------------------------------------------------------------------

So all the restricted cash is now -- I mean which relates to the rentals or lease payments is now dollar-denominated?

--------------------------------------------------------------------------------

Aditya Pande, InterGlobe Aviation Limited - CFO [63]

--------------------------------------------------------------------------------

Yes. That's true. 100% of that.

--------------------------------------------------------------------------------

Sonal Gupta, UBS Investment Bank, Research Division - Director and Research Analyst [64]

--------------------------------------------------------------------------------

Okay. That's great. So -- and just on the, like, international operation versus domestic, I mean, like, clearly, the stage length would be much, much higher. I think domestic may be 1,000 kilometers. I would -- on an average, the international would be, maybe, 3x of that.

So could you just give us some sense in terms of the -- how does the yield versus cost metrics work? And I mean what would be some sort of rule of thumb or equivalent number that we should think about? Because, obviously, a higher international will sort of depress yields a bit, but it may be, actually, more profitable. So I just want to understand that.

--------------------------------------------------------------------------------

Ronojoy Dutta, InterGlobe Aviation Limited - CEO [65]

--------------------------------------------------------------------------------

And so look, it -- there is, again, the seasonal idiosyncrasies, if you will, that you have to deal with. And so certain seasons, international is very strong and the domestic is not as strong, and then it reverses itself again. So net-net, when we look at it, we're very happy with our international growth. Really, we have put in, say, 100% growth in ASK, and then you would have thought, oh, my god, this would really depress the yields and profitability, and that has not happened.

And some of the sectors are actually very, very strong. And I can point to Saudi Arabia, China, they surprised us with their strength. Obviously, at the same time, Hong Kong was weak. And as I've said before, we started Vietnam with very little booking availability, and we're waiting for that to play itself out.

Overall, I'm guessing that over the next -- over the long haul, domestic and international will both continue to do equally well. And to the extent that some domestic flights are weak, we'll cancel them and move it to international. And to the extent that some international flights are weak, we'll cancel them and move them to domestic. So we really don't see a big demarcation between one versus the other.

And the same thing sort of applies to all our 6 metros. Sometimes, Chennai does better. And sometimes, Delhi does better, and we move capacity around. So there's no hard and fast like, "Oh, yes, we know this is good, and we know that is bad." This all seems to have economic dynamics, seasonal dynamics, and we move the capacity around constantly.

--------------------------------------------------------------------------------

William Boulter, InterGlobe Aviation Limited - Chief Commercial Officer [66]

--------------------------------------------------------------------------------

It's Willy Boulter here. Maybe I'll just add. You're asking about the stage length effect.

--------------------------------------------------------------------------------

Sonal Gupta, UBS Investment Bank, Research Division - Director and Research Analyst [67]

--------------------------------------------------------------------------------

Yes. Yes.

--------------------------------------------------------------------------------

William Boulter, InterGlobe Aviation Limited - Chief Commercial Officer [68]

--------------------------------------------------------------------------------

And basically, what you have to bear in mind is that, yes, the yield per kilometer on a longer stage length will be lower. But equally, the costs are, too, because -- for a number of reasons. But one, operationally, the aircraft is spending a longer time at cruising altitude as a proportion of the flight. And so again, the fuel cost per ASK is less. And there are a number of -- the crew productivity's obviously better. And there's a number of reasons. But longer stage lengths, yes, they mean usually lower yield, but equally, they mean lower cost per ASK.

--------------------------------------------------------------------------------

Sonal Gupta, UBS Investment Bank, Research Division - Director and Research Analyst [69]

--------------------------------------------------------------------------------

Sure. No -- so just on that -- that's what I was trying to understand. That -- is there a -- like if your stage length is -- I mean, like, domestic is roughly 900 or 1,000 and international is 3,000. Will that -- I mean will that mean that even with a 10% yield, you would be equally profitable -- less or lower yield, you would be equally profitable? I mean just -- is there a rule of thumb there?

--------------------------------------------------------------------------------

Ronojoy Dutta, InterGlobe Aviation Limited - CEO [70]

--------------------------------------------------------------------------------

There are very well-established charts of revenue and cost by range, and we can share that with you. I'll ask Ankur to reach out to you. And these are internationally available amongst all airlines. So what happens at the short stage length, what happens at long stage length, how does the yield curve and the -- I'm sorry, the revenue curve and the cost curve behave. And they tend to go down in parallel as Willy suggests. Net-net, the -- profitability-wise, it doesn't make that much of a difference.

--------------------------------------------------------------------------------

Sonal Gupta, UBS Investment Bank, Research Division - Director and Research Analyst [71]

--------------------------------------------------------------------------------

Sure. So that would be very helpful. And just lastly, how much of the capacity is on metro routes on the domestic side? I mean the...

--------------------------------------------------------------------------------

William Boulter, InterGlobe Aviation Limited - Chief Commercial Officer [72]

--------------------------------------------------------------------------------

The total metro-to-metro capacity is 24% to 25% of our total capacity for the quarter under review.

--------------------------------------------------------------------------------

Sonal Gupta, UBS Investment Bank, Research Division - Director and Research Analyst [73]

--------------------------------------------------------------------------------

The total, including international you're saying, or just for domestic?

--------------------------------------------------------------------------------

William Boulter, InterGlobe Aviation Limited - Chief Commercial Officer [74]

--------------------------------------------------------------------------------

Yes. Yes.

--------------------------------------------------------------------------------

Operator [75]

--------------------------------------------------------------------------------

The next question is from the line of Lokesh Garg from Crédit Suisse.

--------------------------------------------------------------------------------

Lokesh Garg, Crédit Suisse AG, Research Division - Research Analyst [76]

--------------------------------------------------------------------------------

This is continuing an earlier discussion which we heard from your side, that your plane deliveries are sort of coming down. We have also been observing that plane deliveries have come down to probably 2 to 3 planes per month. The question is, going at this rate of 3 planes per month, which seems to be a comment from your side, could we get to 25% also? Or would we undershoot that as well?

--------------------------------------------------------------------------------

Ronojoy Dutta, InterGlobe Aviation Limited - CEO [77]

--------------------------------------------------------------------------------

So really, it depends on whether we catch up on the deliveries or slow down further. So that's a bit of a moving target. As I said also that we will also be increasing utilization a little bit, not a lot, but slowly. So between all that, I think it's around 25%. So it could be 22%, 25%, we're not as precise at this point, depending on how the deliveries shape up. So we're in constant touch with the manufacturers, of course, trying to [urge] them to send us more airplanes.

--------------------------------------------------------------------------------

William Boulter, InterGlobe Aviation Limited - Chief Commercial Officer [78]

--------------------------------------------------------------------------------

I think also, there's another effect, which is the 321s are coming in. And so that's adding more capacity even though the number of airframes is not as fast as we'd like. But 321, obviously, has about 40 more seats on it.

--------------------------------------------------------------------------------

Lokesh Garg, Crédit Suisse AG, Research Division - Research Analyst [79]

--------------------------------------------------------------------------------

Yes. And just sort of continuing that, we have particularly observed that 321 additions have specifically slowed down even more. And I think your commentary seems to suggest about nine 321 aircraft only so far. Do you face even stronger constraint in 321 deliveries versus the 320 neos?

--------------------------------------------------------------------------------

Wolfgang Prock-Schauer, InterGlobe Aviation Limited - President & COO [80]

--------------------------------------------------------------------------------

Yes, that's correct. A321 might slow down because they're primarily -- or are produced in Hamburg. And Hamburg is the place where the industrial issues are, where there's -- most of the slow -- the delays happen. But it's only a temporary thing. What we have -- the forecast there from Airbus is it shows a catch-up within 3 to 6 months.

--------------------------------------------------------------------------------

Lokesh Garg, Crédit Suisse AG, Research Division - Research Analyst [81]

--------------------------------------------------------------------------------

Okay. My last question, probably. There is a lot of discussion, particularly in the press, related to your Europe offerings starting someday, and the news reports seem to suggest that your [turn time] takes slots that you have not utilized on London sector. Any outlook on that that you can share?

--------------------------------------------------------------------------------

Ronojoy Dutta, InterGlobe Aviation Limited - CEO [82]

--------------------------------------------------------------------------------

Not at this point, no. As we said, I think, earlier to a question, we are studying it. No definitive projections on dates yet.

--------------------------------------------------------------------------------

Operator [83]

--------------------------------------------------------------------------------

The next question is from the line of Deepak Krishnan from Goldman Sachs.

--------------------------------------------------------------------------------

Pulkit Patni, Goldman Sachs Group Inc., Research Division - Equity Analyst [84]

--------------------------------------------------------------------------------

This is Pulkit from Goldman. First, regarding international operations, clearly, for the last 6-odd months, we've been adding capacity quite meaningfully there. But are we pretty much done with the large part of the short-haul groups that we can address with that current fleet? And at what stage should we expect our international expansion relatively slowing down assuming we don't really go the long haul?

So basically, what we wanted to really understand is, is there more opportunity for us to really grow on the short-haul international route after what we've done in the last 6 months?

--------------------------------------------------------------------------------

Ronojoy Dutta, InterGlobe Aviation Limited - CEO [85]

--------------------------------------------------------------------------------

Yes, there's lots of opportunity. I mean, look, we fly to just 2 Chinese cities. And we fly to Vietnam from only 1 city. As you know, we have 6 metros we can fly from, and China, Vietnam, Middle East, Russia, all these are available to us, Africa. So we're not short of opportunities at all. If anything, it's timing in terms of aircraft deliveries. And of course, bilaterals. Bilaterals are a big factor in all this. The government in China -- we have 7 more frequencies we can fly and then we need to add that to the bilateral, same thing in Vietnam and so forth. So bilaterals are constrained, and aircraft deliveries are constrained. Opportunities are not an issue.

--------------------------------------------------------------------------------

Wolfgang Prock-Schauer, InterGlobe Aviation Limited - President & COO [86]

--------------------------------------------------------------------------------

And if I may add here, within the 6-hour range of our aircraft on both sides, we have Istanbul on one side and Hong Kong or Guangzhou on the other side, 2/3 of the world population is living. And they all -- for 6 hours, our aircraft and our business model works very well. And if you take this, you can -- it shows you what -- how much opportunity we have with our aircraft and with our business model here.

--------------------------------------------------------------------------------

Operator [87]

--------------------------------------------------------------------------------

The next question is from the line of [Abhishek Joshi] from CGS-CIMB.

--------------------------------------------------------------------------------

Unidentified Analyst [88]

--------------------------------------------------------------------------------

Yes. I wanted to ask what percentage of tickets were sold in the 15-day bucket during the quarter. And what has been the trend right now?

--------------------------------------------------------------------------------

William Boulter, InterGlobe Aviation Limited - Chief Commercial Officer [89]

--------------------------------------------------------------------------------

Yes, I can answer that. I mean for the quarter under review, there was an improvement, certainly, in the domestic market from 47% sold within 15 days to 51% out of our load factor, whereas beyond 15 days went from 40% down to 36%. So domestically -- and that helped, obviously, produce the yield improvement that we saw of almost 10%.

--------------------------------------------------------------------------------

Unidentified Analyst [90]

--------------------------------------------------------------------------------

And what was the price behavior in this 15-day window if we compare it with Q2 and Q1 quarter?

--------------------------------------------------------------------------------

William Boulter, InterGlobe Aviation Limited - Chief Commercial Officer [91]

--------------------------------------------------------------------------------

Sorry, what was the price?

--------------------------------------------------------------------------------

Unidentified Analyst [92]

--------------------------------------------------------------------------------

Yes, yes, yes.

--------------------------------------------------------------------------------

Ronojoy Dutta, InterGlobe Aviation Limited - CEO [93]

--------------------------------------------------------------------------------

In -- sorry, it depends on the -- are you saying a particular segment that you have in mind? Or just system-wide?

--------------------------------------------------------------------------------

Unidentified Analyst [94]

--------------------------------------------------------------------------------

Just in total domestic.

--------------------------------------------------------------------------------

Ronojoy Dutta, InterGlobe Aviation Limited - CEO [95]

--------------------------------------------------------------------------------

So our yields are up by 9%, right?

--------------------------------------------------------------------------------

William Boulter, InterGlobe Aviation Limited - Chief Commercial Officer [96]

--------------------------------------------------------------------------------

Yes.

--------------------------------------------------------------------------------

Ronojoy Dutta, InterGlobe Aviation Limited - CEO [97]

--------------------------------------------------------------------------------

So -- I mean isn't that the answer?

--------------------------------------------------------------------------------

Unidentified Analyst [98]

--------------------------------------------------------------------------------

Okay. And can you comment on -- like, is the -- you were saying that the market in terms of price is softening. So is it just the domestic market? Or we are facing the same issue in the international?

--------------------------------------------------------------------------------

Ronojoy Dutta, InterGlobe Aviation Limited - CEO [99]

--------------------------------------------------------------------------------

No. It's mostly the domestic that we're seeing the impact. And again, it is -- like I said in my opening remarks, it's a big -- a lot of it is focused on the metro to metro. As you know, a lot of new capacity came in those markets that's yet to be [catered]. And that's where we're seeing the biggest pressure because there's new capacity coming in which is not yet found its footing, if you will, and that's where we're seeing the major softening.

--------------------------------------------------------------------------------

Unidentified Analyst [100]

--------------------------------------------------------------------------------

And what kind of share we are having right now in the 15-day bucket window in the current quarter?

--------------------------------------------------------------------------------

Ronojoy Dutta, InterGlobe Aviation Limited - CEO [101]

--------------------------------------------------------------------------------

I don't think we -- we can't share that, I think. I mean it's tough to get that number, frankly. I mean we'd have to know every competitors' 15-day bucket sales, and we don't.

--------------------------------------------------------------------------------

Unidentified Analyst [102]

--------------------------------------------------------------------------------

Okay. And lastly, we -- as you said that from next year onwards, there would be slower growth in the number of fleets that we would be adding. So can we also -- is there any possibility that you maybe start replacing your ceo fleet with a new fleet?

--------------------------------------------------------------------------------

Ronojoy Dutta, InterGlobe Aviation Limited - CEO [103]

--------------------------------------------------------------------------------

Now if we got planes faster, we would. The issue is in the supplier side, right? So the reason we are not growing fast enough is because we're not getting the airplanes fast enough from Airbus. So yes, if we got them faster, we would be replacing the ceos faster.

--------------------------------------------------------------------------------

Unidentified Analyst [104]

--------------------------------------------------------------------------------

And what rate would you target to replace it? Any goal on that?

--------------------------------------------------------------------------------

Ronojoy Dutta, InterGlobe Aviation Limited - CEO [105]

--------------------------------------------------------------------------------

I -- really, we don't have those numbers. If and when we get more aircraft deliveries, we'll have to see whether we can -- we should be adding capacity or replacing.

--------------------------------------------------------------------------------

Operator [106]

--------------------------------------------------------------------------------

The next question is from the line of Deepika Mundra from JPMorgan.

--------------------------------------------------------------------------------

Deepika Mundra, JP Morgan Chase & Co, Research Division - Research Analyst [107]

--------------------------------------------------------------------------------

So just a following up on the maintenance expenses, again. The onetime charge that you have taken, is it also because you are expecting the ceos to stay longer in the fleet now versus earlier? And just to reclarify, so it's 0.6 per ASK for the quarter? And you're expecting this 0.6 to continue for the next couple of quarters as well?

--------------------------------------------------------------------------------

Ronojoy Dutta, InterGlobe Aviation Limited - CEO [108]

--------------------------------------------------------------------------------

So we -- to your first question, no, we are not planning to extend the leases on the ceos. The ceos, as we said, was -- start going out in '21 and by '22, they're pretty much gone. We have sort of upgraded or reestimated, if you will, our actual experience with the ceos, and we've said we need to take our accruals up based on what we're seeing. That's all we've done. And by '21 -- end of '21, we should be out of this problem.

--------------------------------------------------------------------------------

Aditya Pande, InterGlobe Aviation Limited - CFO [109]

--------------------------------------------------------------------------------

And the 0.6 question, I didn't get it. Can you come again on that?

--------------------------------------------------------------------------------

Deepika Mundra, JP Morgan Chase & Co, Research Division - Research Analyst [110]

--------------------------------------------------------------------------------

Oh, sorry. So just some confusion because -- on whether that INR 3 billion is a onetime charge or not. So if you look at it on a per ASK basis, it's 0.63 for the quarter. So what I want to understand is that -- the same level continues, right, of 0.6 per ASK for the next 2 or 3 quarters depending on how you [defer] down the maintenance expenses?

--------------------------------------------------------------------------------

Aditya Pande, InterGlobe Aviation Limited - CFO [111]

--------------------------------------------------------------------------------

I think you should look at this as an overall bucket of our supplementary rental and lease costs. We expect that bucket to remain in that range for the next 2 quarters. This is defined by the engines going on, on shop visits. It's defined -- the cycle that's running in a particular month, in a particular quarter. It's very difficult to estimate engine by engine for the overall fleet what it means. The guidance that you should use is that on a supplementary rent bucket overall, the numbers should remain in that range.

--------------------------------------------------------------------------------

Ronojoy Dutta, InterGlobe Aviation Limited - CEO [112]

--------------------------------------------------------------------------------

So most importantly, I don't think you should use the ratio because this is not engine cost spread over all airplanes. The neos don't have this problem. So if we add more neos, it doesn't mean our engine maintenance costs go up. Engine maintenance cost on the ceo is a fixed pool. And that's the number that we are using, and that's what you should use. If we add more neos in our growth plan, it doesn't mean that engine maintenance cost goes up proportionately to the 0.63 that you're mentioning.

--------------------------------------------------------------------------------

Deepika Mundra, JP Morgan Chase & Co, Research Division - Research Analyst [113]

--------------------------------------------------------------------------------

Got it. And also, I think, sometime next year, this may or may not happen, but the MAX planes are expected to come back into the system. Given that -- the kind of softness that you're seeing, do you expect that it could continue well into next year if the ban on the 737 MAX is lifted?

--------------------------------------------------------------------------------

Ronojoy Dutta, InterGlobe Aviation Limited - CEO [114]

--------------------------------------------------------------------------------

So the softness is an economic issue. And your crystal ball is as good as mine. Are we in a softening economic environment? Looks like it, looking at the Diwali experience. When will this stop? Next year, will the economy get stronger? I think you are a better economic forecaster than I am on that issue.

--------------------------------------------------------------------------------

Operator [115]

--------------------------------------------------------------------------------

That was the last question. I now hand the conference over to Mr. Ankur Goel for closing comments.

--------------------------------------------------------------------------------

Ankur Goel, InterGlobe Aviation Limited - Associate VP of Treasury & IR [116]

--------------------------------------------------------------------------------

Thank you all for joining us. I hope you found it useful and hope to speak to -- with you again. Thank you.

--------------------------------------------------------------------------------

Operator [117]

--------------------------------------------------------------------------------

Thank you. Ladies and gentlemen, on behalf of IndiGo, that concludes this conference call for today. Thank you for joining us, and you may now disconnect your lines.