Interglobe Aviation Ltd
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Interglobe Aviation Ltd
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Good evening, ladies and gentlemen, and welcome to IndiGo's conference call to discuss the fourth quarter and fiscal year 2022 financial results. My name is Faizan, and I'll 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, Ms. Richa Chhabra from the Investor Relations team of IndiGo. Thank you, and over to you, ma'am.
Good evening, everyone, and thank you for joining us for the fourth quarter and fiscal year 2022 Earnings Call. We hope that you and your families are safe, and in good health. We have with us our Chief Executive Officer, Ronojoy Dutta; and our Chief Financial Officer, Gaurav Negi, to take you through our performance for the quarter. Wolfgang Prock-Schauer, our Chief Operating Officer; Sanjay Kumar, our Chief Strategy and Revenue Officer; and Kiran Koteshwar, our Chief Program Officer and Head of Investor Relations, 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 by the end. The transcript of the Q&A session will be uploaded subsequently.
With this, let me hand over the call to Rono Dutta.
Good evening, everyone, and thank you for joining us on this call
[Audio Gap]
We reported a net loss of INR 16.8 billion. Excluding foreign currency loss of INR 6.1 billion, our net loss aggregated to INR 10.7 billion. We swung from a profitable third quarter to a loss-making fourth quarter because of around 15% higher fuel prices, around 11% low capacity due to Omicron, and a lower RASK of 2.9%.
For the year ended '22, we reported a net loss of INR 61.6 billion. Excluding foreign currency loss of INR 9.4 billion, our net loss aggregated to INR 52.2 billion. Excluding [indiscernible] impact, our operating losses reduced by around 18% year-over-year. We deployed around [ 55% ] higher capacity, and reported around 77% higher revenue from operations in fiscal year 2022 as compared to the fiscal year 2021.
Our financial results for the full year and the reported quarter was severely affected by the pandemic. First by the Delta wave, and then by the Omicron wave, which hit us this quarter. Even with these challenges, we served around 50 million passengers in the fiscal year 2022, an increase of 62% as compared to fiscal year 2021.
Focusing specifically on the fourth quarter. It would be helpful to break the revenue discussion into 2 distinct periods of 6 weeks each. The first 6 weeks of significantly lower demand as of Omicron. We operated an average of 1,098 flights per day with below average yields. However, we saw a strong rebound in the 6 weeks starting mid-February once the rate of Omicron infection is reduced.
During this mid-February to March period, we operated an average of 1,366 daily flights with a strong uptick in unit revenue. While overall RASK during the March quarter reduced marginally by 2.9% to INR 3.97, primarily due to a reduction in load factor by 3% as compared to the December quarter. Yields have remained a good story and held steady at INR 4.40. Importantly, this is comparing a seasonally weak March quarter to a seasonally strong December quarter.
As per the official aviation guide, IndiGo emerged as the sixth largest airline in the world and the fastest in terms of growth. We were ranked #4 in terms of punctuality worldwide. It is exciting to see IndiGo among the top airlines in the world, both in terms of scale and quality of service. Towards the end of March, the government allowed international schedule operations. We ended the quarter with over 100 international flights, and are currently operating over 90% of our pre-COVID international flights.
We also announced a proposed strategic partnership with Qantas Group. This proposal will be testament with an international carrier, along with American Airlines, Air France-KLM, Qatar Airways and Turkish Airlines. These partnerships will help IndiGo access new markets and a new set of customers.
We reported a CASK or unit cost of INR 4.79 for the March quarter, which is 18.9% higher sequentially. This high unit cost was primarily attributable to adverse movement in rupees, reduction in capacity deployment, and increase in fuel pricing. We have just experienced 2 very turbulent years in our history. And this would get good time to step back and access IndiGo's performance. We were hit by 3 waves of COVID-19, which caused the sharp decline in demand. We witnessed a sharp rise in fuel prices over the last few months.
Capacity and aircraft utilization was severely curtailed. We reported large back-to-back losses totaling INR 119.7 billion over the 2 years. We also experienced a significant strain on our balance sheet. There is no question that we have taken it on the chin in terms of COVID, fuel prices and operating losses.
Now let us ask ourselves, how IndiGo has responded to this crisis? We strengthened our domestic network. We focused on superior customer service to ensure a higher share of passengers. We rightsized our workforce. We improved our yields in an impressive manner. We positioned ourselves for an aggressive international expansion with building connecting traffic at our hubs and negotiating multiple [indiscernible]. We significantly restructured our fleet to ensure lower maintenance costs and low fuel burn, the 2 key drivers of our cost.
We launched new initiatives such as cargo freighters and digital. We strengthened our relationship with our business partners. We restored our free cash balance to INR 76.6 billion. And now with all these operational factors mentioned above, I would also like to highlight that we have exercised continuous improvement in governance, compliance and ESG initiatives. The problems we have experienced in a 2-year performance such as COVID, fuel, large losses, et cetera, are of course, all cyclical in nature. In contrast, all our responses have been strategic and sustainable in nature.
Consequently, I'm proud to say we have emerged as one of the top 10 airlines in the world, both in terms of size and quality. And importantly, we're the fastest in terms of growth.
Looking ahead, we are blessed to be domiciled in probably the most exciting aviation market in the world. And within that market, we are structurally the strongest player. Therefore, we are extremely bullish on our long-term outlook.
We would like to thank our shareholders for their patience patients during these difficult times. And assure them the profitability that is very much on the top of our mind.
Now let me hand over the call to Gaurav to discuss the financial performance in detail. As you are aware, Gaurav has joined us as the new CFO. Gaurav has been with IndiGo from December 2021. He has vast experience spanning across more than 2 decades with several reputed organizations, and we're excited to have Gaurav as part of our team. Over to you, Gaurav.
Thank you, Rono. Good evening, everyone. For the quarter ended March 2022, we reported a net loss of INR 16.8 billion. Excluding the foreign exchange impact, we reported a net loss of INR 10.7 billion. We reported an EBITDAR of INR 1.7 billion for the quarter ended March 2022 compared to an EBITDAR of INR 20 billion for the quarter ended December '21.
For the year ended March 2022, we reported a net loss of INR 61.6 billion. Excluding the foreign exchange impact, we reported a net loss of INR 52.2 billion compared to a net loss of INR 63.3 billion for the year ended March 2021. We reported an EBITDAR of INR 11.5 billion for the year ended March 2022 compared to an EBITDAR of INR 6.2 billion for the year ended March '21, an increase of around 84% against a capacity increase of around 35%.
Some of the key variations of our performance in the March quarter as compared to the December quarter are as follows. Yield for the quarter remained steady at INR 4.40. Reduction in load factors at 3 points led to a CASK decrease of 2.9%. Our fuel CASK increased by 10.9% sequentially to INR 1.58, driven by an increase in average fuel price by around 11%.
Our CASK ex fuel ex ForEx for the March quarter was INR 2.91, which is around 12% higher than the December quarter, primarily due to the operating at a lower capacity.
The update on cash is as follows. We ended the March quarter with a free cash of INR 77.6 billion, a marginal net reduction of INR 0.5 billion versus the December quarter. Our total cash as of March 31, 2022 was INR 182.3 billion. On the other key balance sheet numbers, we ended the quarter with capitalized operating lease liability of INR 316.7 billion, and total debt, including the capitalized operating lease liability of INR 368.8 billion. Our ROU assets at the quarter end was INR 204.4 billion.
The demand has picked up well during the latter half of March quarter. The resumption of scheduled international travel will help us improve our margins. Based on our current estimates, our total capacity deployment in the fiscal year 2023, in terms of ASKs, will be in the range of 55% to 60% higher than our capacity deployed in the fiscal year 2022, which would roughly translate into 13% to 17% growth as compared to a pre-COVID fiscal year of 2020. Specifically for the first quarter of fiscal year 2023, we expect the capacity to rebound at almost 2.5x the capacity deployed in the first quarter of fiscal year 2022.
We are encouraged by the improvement in revenue performance but currently challenged by an increase in fuel and weakening rupee. In order to address these headwinds, we are taking countermeasures, but meaningful improvement in these 2 macro drivers will be critical for us to transition that on a path of profitability.
With this, let me hand it back to Richa.
Thank you, Rono and Gaurav. [Operator Instructions]
And with that, we are ready for the Q&A.
[Operator Instructions]
First question is from the line of Binay Singh from Morgan Stanley.
Congratulations for a good performance in a very challenging environment. Overall, we are trying to understand how to think about profitability into the coming year? Clearly, in terms of capacity, this will be a record year for IndiGo, and even on traffic side, we are seeing very good traction. So could you talk a little bit about how are the yields playing out? Are you able to pass on the cost pressures? Maybe to answer that, if you could share how were your yields in the second half of March quarter?
Because as I understand that the yields that we've reported also would have been adversely hit by very weak yields in the first half. So could you share us -- care to share few thoughts on how to think about profitability? Secondly, the ForEx loss looks much larger than we anticipated. Could you talk a little bit about that also?
Okay. So how do we get back to profitability. And as you said, really this tug of war going on. And the tug of war is between, I think, a very good revenue performance and a very challenging fuel and the rupee weakening And just staying on the revenue side. I think I'm really impressed with what our team has done on the revenue side. And I congratulate them on doing great work.
It's not been easy. It's clearly very -- you almost have to hit the point, the sweet spot, just right because you can keep pushing up fares and at a certain point, demand actually falls off. So judging which that point is and just pushing it to the right level I think is kind of the science and the art of all this. And again, our revenue team is doing a great job.
March was the strongest month last quarter, and to give you a sense of where the terms are going, April unit revenue was 6% higher than March, and the May month-to-date unit revenue was again another 6% higher than April, which is what I mean by the revenue guidance.
But to counter sort of balance the story though, April fuel prices were 11% higher than March. And May fuel prices were 6% higher than April. So you have a tug of war. But the key to profitability is to keep managing our business on the revenue side. Of course, cost need to be under control. That's always said, but we won't save ourselves into profitability. We have to get it on the revenue side.
And at the same time, hopefully, we get a break on fuel and the rupee. Did I answer your question?
Sir, just to give us an idea so what was your March yield?
Do we have a monthly breakup [indiscernible].
Just so that we can understand that what are the yields trending in absolute sense.
We will give it to you. What was the March yield, Sanjay? We'll find that in a second. And while we're looking for it. Gaurav, do you want to talk about the ForEx? You had a question in ForEx, right? Why it's a big...
Yes. Binay, on the ForEx front, the impact has been around INR 600 crores. Now that's largely because the rupee has weakened approximately 2 points between December and March. So a large chunk of the ForEx impact that you're seeing is market-to-market, given that the balance sheet that we have is close to INR 300 crores of capital leases that we have. That will give you that we've got a INR 600 crore FX impact coming into quarter, largely because the rupee is weakening by 2 points in one [indiscernible].
Okay. Sanjay just tells me that the March yield was 5.14.
March was 4.71. April was 5.14.
April was 5.14. March was?
4.71.
4.71. So Binay, I hope you've done with that? Next question?
The next question is from the line of Deepika Mundra from JPMorgan.
Just following up on yield. So March 4.7, April, 5.1, what would be the -- how much of the delta would be potentially from the reopening of international flights?
Well, we don't want to get too much in details. I already see that I have given too many numbers. So international -- I can say the international profitability has been stronger than domestic. And it always is. So that's good news. But I don't want to now break up yields into domestic versus international.
Okay. And the significant capacity increase that you're planning for next year, could you give us a sense as to how much of that skew is again towards international versus domestic?
So I can only give you our long-term trajectory on this. Short term, as you can imagine, there's a lot of volatility. For example, Sri Lanka is a problem. It's not opening as fast as we'd like. China is absolutely closed. So there'll be some loopholes for us to go through the process.
Overall, pre-COVID, our capacity was 25% of our system. Our projection is within 5 years from now, international will be about 40% of our system. So international will be growing faster, but the rate of growth is very much dependent on how markets open up separately or individually.
Understood. And if I may just sneak in one more. The codeshare agreements, how do they pan out in terms of profit dynamics as compared to flights run singularly by IndiGo?
So the key to making money on codeshare is prorate agreements. So every time a paste from KLM or Qatar or anyone gets on our flight, the question is how -- what sort of prorate are we charging them? And how do we compare to our bidders. So we have a good position in the marketplace as you know, and therefore, are able to negotiate quite attractive prorates. So therefore, we are excited about codeshare agreements.
The next question is from the line of Mitul Shah from Reliance Securities.
So the way rupee movement is happening in this quarter in April and May, even slightly sharper than the previous quarter, which implies that the losses could be like a INR 700 crores, INR 800 crores this quarter. Is it a right understanding? Or even more than that?
We know that -- look, so I don't know how you -- how investors generally look at above the line and below the line. So we are trying desperately to be profitable above the line. But if the rupee keeps growing as its growing, and then we have the big mark-to-market direction and below the line, we take a big hit. So yes, as the rupee depreciates further, you can expect big mark-to-market investments.
Sir, my second question is on -- what is the kind of a feedback you people are experiencing after sharp price hike on the ticket side -- ticket price increases? What Is the response on the customer side till the affordability seems to be reasonable? Or do you think -- do you feel any negative sizable -- noticeable negative impact on the traffic side?
So clearly, it's a balancing game. If you see the customer resistance to higher prices, you sit on the lower prices, right? I wish our load factors were higher than they are. And they're not because -- yes, we are getting some resistance. At the same time, the fact that we're getting unit revenue up, which is what's important. It doesn't matter whether you take it on need or load factors, you want the unit revenues to keep going up, and we're doing quite well on unit revenue. And is key to the performance. So yes, there'll be load factor pressure as we increase prices, no question.
Lastly, on the -- after this capacity utilization and capacity increase for FY '23, whichever number you indicated, would that be close to pre-COVID level or even higher? Or still it will remain below pre-COVID level?
We already higher than pre-COVID level.
As we said it's going to be close to 13% to 17% higher.
Okay, yes.
So I mean through all those questions, I just kept to emphasize. The revenue performance has really been good. And I would say, surprisingly good, and thanks again to our commercial team. They're doing a great job on the revenue side. As you alluded, is there customer pressure, is there customer resistance? My god these prices are going up. But we have to, to survive. We're still doing what is [indiscernible], we have to with this fare.
And as you've said many times, India has the lowest fares in the world. So I hope that the stories are sustainable in the long term. We do need to have higher fares, but this fuel and the rupee really are a problem.
The next question is from the line of Chintan Sheth from Sameeksha Capital.
Am I audible?
Mr. Sheth, sorry to interupt you, the audio is not clear from your line.
Am I audible?
Yes, sir.
Sir, on the capacity again, which industry getting consolidated, and new players are trying to get -- start the operations, and our plan of very strong capacity addition next year. Do you foresee -- what's your take on yield? How it will pan out?
So the industry has been behaving quite rationally [ at least to say]. We do have a lot of players already. And everyone recognizes with the fuel doing what it's doing with the large losses we've incurred, we all need to repair balance sheet. So I am hopeful that the new players are actually seasoned players. If you look at the management team at both CASA and Jet Airways and so forth, they're seasoned players. So I expect that the rational behavior will continue, and we wouldn't see any crazy price wars or anything like that.
And second on small bookkeeping. Sequentially, we see OpEx as well as employee costs rising. I understand that we must have planned for better capacity, but because of Omicron, we kind of need to pull back our capacity, and that's resulted into, timing-wise, rationalizing our cost. So going forward, what kind of run rate we should look at? If you can throw some light on that.
You're talking about employee costs, specifically?
Yes, sequentially, it has increased both employee costs and other OpEx. So I'm just trying to understand how should that trajectory look like?
So employee costs, clearly, we have some snapback in wages, and it's not over yet. As you know, for example, pilots, we've given 8% and promised another 6.5% in November. And we keep looking at those numbers, and as profitability improves, we will be doing some fare raises along the way. So yes, rates will go up. As far as productivity goes, that's where our emphasis is. So in every department, from flight crews to operations to commercial, we're looking at employee productivity, and trying to sort of manage that as best as we can.
But in the actual period, yes, we would expect them to go up in an inflationary environment.
Any number in terms of ASK or percentage growth?
No. No. I mean it's a very delicate and again, just I can say we have to manage revenue very carefully. We have to and this also very fully. We have to be absolutely conscious of the fact that their employees are facing an inflationary environment that we need to give pay raises. We are very conscious of the fact that they have all worked very hard through 2 years of COVID.
At the same time, we need to keep an eye on the profitability of the company as well. So it is a balancing act, and I won't like to give any forecast.
And other expense from INR 742 crores to INR 834 crores, sequentially?
Again, sequentially, we had a one-off in Q3. So excluding that, there have been some increases in OpEx costs in line with some of our increases that we've seen in international operations. That is driving some of the cost out. But again, to Rono's point, in terms of as a percent of ASK, that's what we will be focused on. And we try to keep it lower in terms of -- as a percent of ASK versus just looking at an absolute number.
The next question is from the line of Arvind Sharma from Citi.
First question would be in a fleet strategy when you gave that number for ASK, is there any fleet number in mind? Because on a quarter-on-quarter basis, your absolute amount of gains have gone down. So is there any number that you have in mind for FY '23 in terms of fleet expansion?
So part of the reason why our capacity is going up because we have such a large number of A321s is coming. I mean it's become a very significant part of our fleet. As we said before, our overall fleet count won't change much. It will be roughly flat. But the capacity will go up because of higher gains.
That's helpful. Secondly, sir, I think this has been, in a way, alluded to in previous comments. The sales have risen quite sharply, but still demand is holding on. Where do you think is that inflection point where anything beyond that in terms of increase in sales would start impacting demand again, even in...
This is a balancing act, and it's a day-to-day activity and almost minute-by-minute activity. We have to just watch the lows carefully. Our job is to maximize the revenue on each flight. And when it comes to load factors or yields, we're sort of agnostic to that. But we need to push revenues for flight up, and that's what we are focused on doing. Within that, I would say, that our customer service is very, very strong.
And if we have a strategy on customer service, it's almost like we want to make sure that the customer has to almost ask themselves, "Why would I make a mistake of not booking IndiGo." So it's through the entire process, in the front end and in the back end. In the front end, we make sure we get more frequencies, more connectivity. So the customer wants to book us. When they fly us, we make sure we provide reliable service, we are courteous. And even after the travel, we want to build trust with the customer.
If you lose your bag, if you need a refund, you can trust IndiGo to do it just right. So part of our revenue strategy is just build great customer service and make sure you get a disproportionate share of the industry we're in.
Sure. If you go to [indiscernible] on the same lines, does the floor and the ceiling on the fares still exist in terms of the regulatory...
Very much so, yes. Very much so, yes.
Okay. And -- okay. So -- and you don't expect to go away. So you expect those -- that big discrepancy in the 15 day we do and beyond [indiscernible]
Hard to tell right in our [indiscernible].
The next question is from the line of Aditya Mongia from Kotak Securities.
My first question was on the growth that you have [indiscernible] for air traffic in general. If the yields kind of stick around the INR 5 or higher mark, sir, just trying to get a sense whether the past growth rates can still be repeated after, let's say, the 1-year [ long ]? Or should one structurally start ticking a little lower growth rate for the sector?
So I'm not sure I understood your question exactly. But you're saying that higher yields, do we expect the growth to continue?
So look, let's do total industry revenue. As you know, industry revenue is roughly gross price as fast as the economy. In fact, there is pretty strong growth in the economy. We had a downturn, but then we recovered nicely. And you look at all the parameters such as GST collections, and all that, and that would be right. The industry -- the economy is fairly strong. So as long as the economy is strong, we expect industry revenues as a whole to grow. Now whether we take it again in yields or in volume, it's up to the rational players in the industry to decide. And clearly, with higher oil prices, you can't take it in volume, you have to take it yields. So that's where we are in the industry.
Yes. As in just to kind of clarify this more, let's say, the period from 2010 to 2020 saw air volumes growing at 3x GDP, almost 3x GDP. The question that I'm asking you is that with yields having made such a big jump up, should one start thinking through lower multiples to GDP growth for air growth -- air traffic growth from hereon?
So let me clarify your question. When we say it's a multiple of GDP, we're talking of revenues. So yes, at a certain period, revenues might have gone up 3x. And revenues across the world, whatever the GDP, the revenue will grow around 2.5x. That's the norm. Within that, the industry players can say, okay, I have this much of revenue coming, do I need more volumes to be pushed? Or do I want yields to remain high. And that will depend on all players, and their individual behavior. But the total revenue growth will not slow down. It will be 2x, 2.5x GDP growth.
That clarifies. The second question that I had was more on the ability of better placed airlines like IndiGo to -- on slightly more on a relative basis. Now with the yields already being so high, are the opportunities to price your offering at slightly higher rates becoming -- are they becoming easier or more difficult?
So it's about the same. But look, high yields are better in the industry, right? And they're increasing faster than the industry. And the question is why? And maybe your secondary question is, is that sustainable? Why are our yields growing faster than the industry? A number of factors. First I'll start with the network. Our network has more penetration. Our network provides low frequency. And importantly, our network provides better connectivity.
So if you're going from point A to point B, there might be 6 airlines flying it. But IndiGo switch connectivity gives you far better options than anyone else, morning, afternoon, evening, we give you all the options. So our connectivity is a huge reason for customers to book us over everyone else. So that's one.
Second, as I said, is overall service, reliability, et cetera. And third is, I would say trust. Whether we have a disruption, we have a plan B. If we have a refund to be made. We are very, very diligent in making sure, hey, let's not hold on to a customer's money. Give it back fast. If your bags are lost, I tell you, we have a team that's like aces. They go on finding lost bags, lost knapsacks, lost laptops. So this whole package of network, customer service, trust, all this builds into a higher yield. And that's why yields are going up. And yes, I believe they're sustainable.
The next question is from the line of Achal Kumar from HSBC.
So I have 2 actually. So one, Mr. Dutta, if you could please take a slight deeper dive into the network. So basically, if you could talk a little bit more about how the metro to metro routes are performing? How metro to non-metro are performing? Where the yields are high? And how the competitive landscape looks because everybody sort of trying to enter metro to non-metro because there the yields are much better.
I mean it's fair enough, and we can understand that. But with the rising competition, of course, there'll be a yield under pressure because the demand has not developed fully there. And similarly, domestic versus international, how do you see the international? Because the fares are very competitive. On Dubai you're flying for INR 14,000, Emirates is also flying for INR 14,000. So looks like the competition is very high. So if you could talk about -- take a deeper dive into the network.
Secondly, on the inflation side, of course, the inflation is writing -- sorry, inflation is rising, and there was an unhappiness between your employees about the salary increase, especially in the pilot phase, but then with the rising inflation, that actually could grow. So how do you see the situation there? What sort of things you need to do? Would that add pressure to the cost? So these are 2 questions you could talk about, please?
Okay. So first on the network. And the network, as you know, and this is not new. There has been a shift, in the sense that I say, 3, 4 years ago, it was all about, "Oh, metro to metro, is so profitto, they are the best routes", and everyone is like filing in metro to metro. That has clearly changed. Metro to metro is still strong, but metro to non-metro, as you said, is getting stronger.
Now within metro to metro though, a huge part of this is corporate travel. And I'm pleased to say that corporate travel is coming back. Yes, we took a sharp hit, but everything says they're coming back, and therefore, metro to metro profits are also increasing.
Metro to non-metro, we have a lot of unique stations that we've gone into. Therefore, we have a lot of unique segments. And so that by itself is good. Within that also, our metros are so well positioned that if you're going from -- I'll just make this up. If you're going to Bhubaneswar to Surat, we'll give you 6 different ways of getting there at 5 different times of the day. That's a huge advantage for us in terms of yield.
So if you look at pricing then, clearly, everyone prices to match. And 90 days out, everyone has matched, 60 days out everyone has matched, and then 15 days out everyone has matched. The question is which airline is getting a higher proportion of the 90-day pricing, and which airline is getting a higher proportion on the 15-day price. That's where advantage comes in. Because of everything that I mentioned, service network, et cetera, we tend to get more of the 15-day pricing. All of this is a network yield game. And the sort of unique, strong network results in the higher yield.
International. International, yes, the markets to the Middle East are very strong, so everyone knows sure. Now within that, what are our advantages? You mentioned Emirates. Well, Emirates will have a certain number of seats, but they are looking at more towards the beyond. So they have pricing in such a way as to get more and more beyond commission. We are pricing in the local market and that's where we have a strength with the narrowbody, we do quite well, and therefore, Middle East looks good. I think that's what you're asking on the international specifically.
Now I'll switch to the employees, right? Look, our overall strategy is engage with the employees, focus on the employees. If we do that, the employees in turn will focus on the customers. And if they do that, the customers in turn will create shareholder value. So it really is a chain of doing everything right for the employees not just say in terms of working conditions, engagement, all of that so that we get better customer service, so that we can share holder value.
We are an inflation environment. We have gone through a very difficult period, first of pickups, and then not full restoration of pay. And we know we have to address this issue. But as we say, [foreign language], we do have a big loss. So much as we just like to give everyone here is, we have to take into account the sort of losses that we are piling up. So we have to manage this very carefully. But I'd say this, our heart is with the employees. We want to do the right thing for them. We'd love to give them more pay raises. So our heart with them, but our head has to work in terms of let's be profitable.
So overall, I think our employees have been resilient. I think extremely loyal. We take all these surveys. And I think we understand. So again, it's not an easy walk in the park. It's something that we manage very carefully. But we'd like to do the right thing for our employees.
Right. Sorry, Mr. Dutta, I was -- actually, Emirates was an example, which has [indiscernible] do. I wanted to understand the overall international network on the Southeast Asian countries, on North Asian countries involved. So Emirates was just an example, which I used.
Okay. So let's talk of our international strategy. Fact is, India is surrounded by strong hubs, which carry a lot of connecting traffic. And what we have discovered through the COVID process is the incredible amount of charter demand we got for point-to-point, and we like how do these people get to these before COVID and then the shutdown and so forth. And the answer is they all went one-stop. Well, if there's so many one-stops, we obviously have a unique opportunity to go nonstop, and I'll just make up some examples.
If you're trying to get to Bali or you're trying to get the Manila or are you trying to get to Hamburg. How do you get there? Well, you get there one-stop on someone with a 3-hour stop layover et cetera, et cetera. And we want to do all this nonstop. So we're looking for all these opportunities. COVID has given us a great learning and feedback and insight into markets. And we're eager to go as soon as we have some more aircraft available. So right now, we're quite hungry for aircraft.
As I said before, our count is not going up, we'd like to increase the count. But I also want to stress the codeshare applicability to all of this, and you look at Doha, you look at Istanbul, all these connections where the other side is flying passengers in and then connecting to our network, that's a very profitable business for us as well. So international has always been, margin-wise, better and continues to be margin-wise better.
And to Southeast Asia, we have more challenges right now, but I think it's temporary. Whether it's Thailand or Malaysia, softer to build up but I think [indiscernible]
The next question is from the line of Mohit Adnani from CRISIL.
I want to understand, has the booking cycle has moved -- has the booking sort of expanded than before because I remember saying in your -- in one of the con calls that because the pandemic in FY '21 and FY '22, India has moved from already a shorter booking cycle to even shorter because people are not sure what the conditions would be. But do you see it going back to pre-COVID levels now or even say, further because since the D-15 fare cap is still there, and fares are high. Are you seeing people booking more in advance than before?
Yes. So the booking cycle has almost become the same as it used to be the pre-COVID level. And we are seeing almost similar kind of booking patterns. More so with the 15 days pricing, which is right now currently enforced by the government. So we are seeing the booking cycle getting back to the pre-COVID level. What is also happening is -- on the international side, we are seeing even better than the pre-COVID level as far as advance bookings are concerned. So we're seeing a higher percentage of people booking in advance 30 days out compared to what they were doing prior to COVID.
Okay. And I just had a quick follow-up. Not exactly a follow-up. I want to know that with 3 recent incidences of the CFM engine having shut down and the DGCA having taken notice of that, do we foresee any delay in receiving the new 320neos, which are going to be powered by the CFM engine set?
[indiscernible] So we don't foresee any delays in how the aircraft are delivered to us and that to say in operations as we have that scale of operation and engine shutdown is a normal case of -- not normal in the [indiscernible]. We want to have it, but it happens from time to time. There are clearly statistics to show that -- we show that. But our strains -- our pilots are trained to handle such situation and we don't foresee any changes in our fleet planing statistics.
The next question is from the line of Pramod Kumar from UBS.
My question relates to the cargo business, sir.
Mr. Kumar, sorry to interrupt you. Please use the handset mode. The audio is not clear.
Is it better now?
Yes, sir.
Yes.
My question is pertaining to the cargo side given the recent announcement of 50% joint venture with UPS. Just want to understand some more details about it in terms of whether does it kind of -- is it over and above your own [indiscernible] plan? And also, is there any overlap or your existing -- the [ strain ] what it carry on the passenger class, will it be also part of the joint venture. So to begin with that, and I have a follow-up on the cargo side.
So first of all, the cargo arrangement between UPS and the integral [indiscernible] group, that has nothing to do with us. That's a stand-alone operation. They have their own agreements which has no impact on IndiGo whatsoever. We, of course, carry UPS. We [indiscernible]. We saw UPS, we saw FedeEx, we saw DHL.
Also, we are neutral to all of those, and we try to do as best as we can by each one of those providers. On our overall cost, we are quite bullish on the cargo business. And as you know, we have 4 freighters coming. And cargo has done very well through the COVID period, and we expect that to continue. But there's no relationship at all, which is what we do on the cargo and what IG Group is doing on their side.
Okay. So that's good because [indiscernible] because that was -- only why there was no extreme filing from your side to this effect. So in a way, it's kind of a promoter is driving this business separately with UPS. But don't [indiscernible] of issue then because IndiGo except has its own state of plans. And so is this a bit of a issue there in terms of both some of the [indiscernible] companies competing for the business? I'm just a bit surprised.
As I said, this is the totally arm the length. We do business with the UPS. We do business with FedEx. We do business with DHL. And we'll continue to do that. They have their own relationship. It really has no overlapping nothing to do with us. No sort of tentacles between the 2 companies.
Next question is from the line of from Iqbal Khan from Edelweiss.
Yes. Am I audible?
Yes.
Sir, I mean, talking about the cargo portion as well. Can you please tell me how much was the cargo revenue for this quarter? Like if I'm not wrong, last quarter, it contributed around 20% of total mix. So can you just give me the number on that? Or how do you see the corporate travel recovery? Has it been 100% of pre-COVID levels now? One is -- this is my first question.
I'll let Sanjay address the corporate travel.
Right. So on the corporate level side, we have seen a complete recovery of the pre-COVID level as par with the pre-COVID levels, especially [indiscernible] March, we had almost 64% of recovery taking place on the corporate travel side. But now in last 2 months, especially in the month of April and May, we have seen pre-COVID level or even higher traffic than the pre-COVID levels. So going forward, I think we are quite bullish about the corporate recovery as well as the business growing from the pre-COVID level.
And for cargo, our year-over-year numbers show 31% growth. So as I said, cargo is strong. And all the signs are that cargo will continue to be very strong going forward.
So how much was it in the overall revenue mix in this quarter?
I don't will be going to that level of detail. I'm sorry.
Okay. And sir, just one. You mentioned that the capacity addition in the first quarter was 2.5x of the Q1 FY '21 -- FY '22. Is that correct? It is what I have heard.
Yes. That is correct.
And how much is it -- and how much would you anticipate for the entire financial year '23?
We gave this summer -- what was [indiscernible].
So we will be around 50% to 60% higher than what we closed 2022 with.
The next question is from the line of Pulkit Patni from Goldman Sachs.
My first question is on yield. So we've obviously got that floor price, which is just something that is supporting us. I think there should be some charters as well. So just to get a sense, how much do you think of the yield that we are getting today, could have a bit of artificial support because of these factors?
Or do you think these yields are absolutely pure yields? And even if the support goes, it shouldn't have an impact. Anything that you can quantify there would be pretty helpful for us. That's my question number one.
Okay. So look -- sorry, the pricing bands have a floor and they have a ceiling. For a long time, you also [indiscernible] on the floor. What prices were doing what we're doing, but we're all sort of managing it with the floor. Now they've come sharply off the floor. They don't hit the ceiling at all or anyway near. So there's still room to grow.
But we are sort of now in between the ceiling and the floor. It's impossible to give a scientific answer, you can only give a gut-feel answer. So my gut feel is, the Indian economy is strong that there has been a structural shift in the way people think of air travel. People travel more, people who could afford it are spending more on travel and vacations, getting together with families. And people before who couldn't afford it now can afford it, and some of them can afford it because income levels have gone up, some of them can actually afford it because their employers are now paying for it.
And some of them just sort of do a trade up mentally or I'm going from Jaipur to Chennai, and I can lose 4 days wages by train or I can pay a slightly higher fare in IndiGo. So I think there's a big structural shift of more people flying more often and substitution of air versus rail. I think not only it's sustainable. I think it's -- we've just seen the beginning of this phenomena. So there's a long way to go in this. Everything that I said, yes, it's starting off. But boy, we've got a long way to go. So I'm very bullish on aviation traffic and [indiscernible] in India.
And sir, international charters, does this still form part of the...
Fewer and fewer. As international has opened up, we've moved from charter to scheduled. But international, again, there's a lot of room for growth. I mean, again, as I keep saying, look at the traffic between Milan and Delhi, and how the hell does it get here. It's not nonstop on anybody. It's all coming to go Doha and Dubai and whatever else. And it's like, come on, let's get a plane and fly Delhi-Milan. So there's lots of opportunity here on this.
Sure, sir. Sir, my second question, more of an observation. I mean, to one of the previous questions you mentioned that this UPS JVs with the IG Group. But the fact that we are also getting into cargo, getting dedicated freighters at a time when this is a joint venture with the promoter. I mean isn't that conflict of interest? I mean if you could just explain this, how would it eventually work? Because obviously, we were very bullish about cargo, which we are focusing on as a company. And at that time, the JV happens with the promoter company. If you could just explain that a little better, it will be helpful.
There's actually no conflict here. So we have -- I don't know, 100 shareholders, each of them do their own thing. Like one of our shareholders wants to get in the cargo business, another shareholders wants to get into the shipping business. What concern is it of ours? And what does the shareholders expect us to do? Nothing. Just ignore them.
We'll do our thing. We'll do the [indiscernible]. And also, again, I don't know exactly what this is, but just knowing UPS, I'm guessing they'll focus more on small shipments and surface shrinking. The travel, I mean, transportation, we won't. We're looking at consolidated shipments probably going international. So hey, it's like 2 ships in the parking in the night. We have nothing to do with each other. We don't single each other, we just ignore it.
The next question is from the line of Joseph George from IIFL.
Is the audio clear?
Yes.
I have 3 questions. Firstly, what is the impact of rising interest rates on [indiscernible]? That is one. Second is, when I do the math with respect to utilization rate of aircraft for FY '23 based on the fact that you are guiding to a 55% growth in [indiscernible] without a significant increase in fleet size. When it comes to about 11 hours.
I want to understand whether there is [indiscernible] product. And given that your international share, as we go ahead, will increase compared to your own history, whether there is -- [indiscernible] increase the utilization beyond what we have seen in the past. That was the second question. I'll take the third one after maybe the response to the first and the second.
So aircraft utilization. Very good question. And yes, a lot of the growth is coming from increased utilization. And part of this is our domestic/international mix. The great thing about the domestic/international is, domestic flight in the day, international flight in the night. So it just works beautifully for us. If there is an objective target feasible number we're shooting for, we'd like to be at about 13.5 hours utilization. And we are a long way from that. So a big part of this, oh year-over-year growth is so high and 70% growth and all that, a lot of this just really coming from utilization.
The next question, what is the impact of interest rates on leasing costs?
So clearly, there is a correlation. But as of date, we see -- it's still not large numbers where we see an impact. And we are sort of booked far out. So it's not like we're doing leasing transactions for next year's deliveries. We have booked far out. So those deals are sort of done and sealed and signed. So for next few years, at least we have no issues. But your point is well taken, if interest rates go to 16% or some huge number, would there be an effect on leasing? Of course, there will. But we are not seeing anything like that yet.
Understood. So just to get a clarification. So the current lease rentals are all locked in at a particular interest rate not governed by variable rates, sir?
And I don't want to say all or nothing, most of them [indiscernible] active negotiations, but we don't do leasing arrangements for the next 6 months. We do them 2, 3 years out. So yes, a huge bulk of them are all done.
Understood. The last question that I had is, you guided for a [indiscernible] growth in ASK. That number sounds very good because we're going to be much higher than pre-COVID levels. I want to understand what is the confidence level on maintaining load factors and yields. I mean increase capacity by 55%, 60% is one thing. But doing that while maintaining load factors at optimum levels, maybe north of 80%, and sustaining high yields, how do you see that playing out?
So again, it's the full package that I want to talk about. I'll repeat everything that I said in a different question. Indian economy, very strong. Indian aviation, lots of opportunities around that's international. IndiGo's position in terms of high customer service and therefore, disproportionate share of revenue, very strong. The dynamics of the Indian aviation of more people traveling, more people traveling more frequently, more people willing to pay a higher price, very strong. So when I put this all things together, what is the confidence level? Very, very high.
Ladies and gentlemen, that was the last question for today. On behalf of IndiGo, that concludes this conference call. Thank you all for joining us, and you may now disconnect your lines.