Richa Chhabra: Good evening, everyone, and thank you for joining us for the Q2 of fiscal year 2027 earnings call. We have with us our Chief Executive Officer, Willie Walsh, and our Chief Financial Officer, Kiran Thadimarri, to discuss the financial performance and are available for the Q&A session. 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. We will upload the transcript of prepared remarks by day end. The transcript of the Q&A session will be uploaded subsequently. With this, let me hand over the call to Willie Walsh.
Willie Walsh: Good evening, everyone, and thank you for joining us on this call. As this is my first earnings call as CEO of IndiGo, I thought I would start by sharing a few thoughts from my first few months with the business. As you know, I joined IndiGo just before the airline completed 20 years of operations, an important milestone and also a good time to reflect on how far the business has come. I knew IndiGo well before joining and had always respected what the airline had built. My first few months inside the business have given me a much clearer view of what drives IndiGo's success: strong cost discipline, a relentless focus on operations, and an experienced team that knows how to deliver at scale. Moving to the quarter, let me start with the operating environment.
Willie Walsh: The global aviation industry continues to face uncertainty, particularly from geopolitical events, which are affecting travel patterns, operating costs, and in some cases, the way airlines operate their networks. We monitor these developments closely, both from a commercial and operational standpoint. Where conditions affect our ability to operate safely, we review the risks and make the necessary adjustments to our network. Safety will always be our top priority. At the same time, the industry continues to operate with fuel cost well above historical levels. Airlines across the world, including IndiGo, have responded through capacity and network adjustments and pricing actions where cost pressures remain elevated. Moving to our financial performance, our reported results were primarily shaped by two factors. First, exceptionally high fuel costs continued to weigh on our financial performance.
Willie Walsh: Second, a seasonally soft period falling between the summer and festive travel peaks and includes the monsoon season. In response, we acted decisively to rationalize capacity, parts of our network. Our pricing actions and disciplines, capacity deployment, together with a 5% reduction in industry seats, support a stronger revenue performance. However, due to the elevated cost environment, we reported a net loss of ₹19 billion. Our liquidity remains strong with free cash of around ₹399 billion, and this positions us to navigate near-term volatility while retaining the flexibility to invest in our long-term growth priorities. Those plans are supported by the significant opportunity we see in India. The near-term outlook may be challenging, but the foundations for long-term growth remain strong.
Willie Walsh: I have spoken about the opportunity in India on many occasions, and I continue to believe it represents one of the most compelling aviation markets in the world. Continued investment in infrastructure, increase in connectivity, and the growing importance of air travel within the broader economy provides a strong foundation for long-term demands. IndiGo's strong base puts us in a good position to capture this opportunity, and our priorities are clear. First, to continue building on the core strengths that have made IndiGo India's preferred airline. Second, to maintain the operating cost discipline that has been fundamental to the company's success. Third, to be disciplined about where and how we grow with a clear focus on long-term value creation. Fourth, to build our international footprint in a measured way, taking advantage of the capabilities of the XLRs and the A350s while preserving the strengths of our low-cost model.
Willie Walsh: Alongside this growth, we are strengthening our relationship with customers through IndiGo BluChip. The program completed two years in October and is approaching 20 million members with more than 30 partners. With that, let me hand over to Kiran, our new Chief Financial Officer, who will take you through the financial performance in more detail.
Kiran Thadimarri: Thank you, Willie, and good evening, everyone. I would like to begin by putting the quarter's performance in context. As Willie mentioned, in the September quarter, we delivered strong revenues in a seasonally soft quarter amid significantly elevated fuel costs. While the reported results capture the combined effect of these factors, it is important to distinguish their near-term impact from the underlying earning strength of the business. First, the fuel costs remain elevated. The benchmark Singjet index was 60% higher than Q2 last year. This increase, along with the rupee depreciation, flowed directly through to our cost base, a 69% increase in our fuel CASK. Second, the quarter reflected a measured and disciplined approach to capacity in a period of seasonally softer demand. We have seen deployment across the industry approximately 5% lower year on year. If you recall, the industry capacity in Q2 last year also reflected seasonal adjustments.
Kiran Thadimarri: Third, in this environment, we delivered a 31% increase in TRASK, which exceeded our guidance of more than 25% growth. While this represents strong revenue performance, it did not fully offset the abnormally elevated costs. Beyond ticket revenue, we are also strengthening ancillary revenues through a combination of broader range of customer choices, easier access to add-on services across our digital channels, and pricing. Our cargo business is also performing well, delivering strong revenue growth of 37% year-on-year growth during the quarter. Moving on to the headline numbers, we reported income of INR 243 billion, representing a growth of 24% year over year, with a yield growth of over 34% and a 2 percentage point reduction in load factors.
Kiran Thadimarri: In terms of profitability, EBITDAR came in at INR 25 billion at a margin of around 11%, compared to an EBITDAR of INR 11 billion and a margin of 6% for the same period last year. On a like-for-like basis, excluding the impact of MTM and hedging, EBITDAR margin declined by 5 percentage points, largely driven by fuel and cost escalations. For the quarter ended 30 September 2026, we reported a net loss of INR 19 billion compared to a loss of INR 26 billion in the same quarter last year. Excluding the MTM and hedging impact, we reported a net loss of around INR 7 billion compared to a net profit of around INR 1 billion in the same period last year. Turning to our cost performance, CASK ex-fuel, ex-Forex, MTM came in at INR 3.45 for the quarter, approximately 15% higher year on year.
Kiran Thadimarri: The increase was largely attributable to the following factors. The 9% depreciation of Indian rupee over the past 12 months, which increased the rupee cost of our US dollar-denominated expenses, and capacity rationalization, which led to under absorption of fixed costs across the operating fleet, and annual contractual escalations. In this volatile environment, we considered it economically prudent to conclude our wide-body damp lease operations with effect from 1 November. We have derived useful long-haul operating experience ahead of the arrival of our A350s. Even as we respond to the near-term operating environment, we continue to invest in our long-term growth priorities. During the quarter, we announced Dar es Salaam as our newest international destination with daily direct services from Mumbai beginning in November. The route expands our presence in Africa and further strengthens connectivity between India and key international markets.
Kiran Thadimarri: Moving to the fleet, we inducted a total of 22 aircraft from our original order books, all of which were inducted through our entity in GIFT City. We redelivered 10 aircraft and 2 damp-lease aircraft during the quarter, resulting in a total closing fleet of 442 aircraft at the quarter end. Turning to the balance sheet, we continue to maintain a strong liquidity position, ending the quarter with total cash of INR 527 billion, comprising free cash of INR 399 billion and restricted cash of INR 128 billion. Moving to our outlook for Q3 of this financial year, we expect capacity to grow in the early single digit YOY. The capacity outlook reflects the conclusion of our damp-lease wide-body operations, the prevailing geopolitical environment, and our disciplined approach to capacity deployment.
Kiran Thadimarri: On the revenue side, the environment remains supportive, with pricing continuing to reflect the higher cost backdrop and the base impact from last year. Based on the trends observed in October, we expect TRASK to grow by more than 25% YOY. For the full financial year, we expect capacity to grow in the early single digits. On the cost side, we expect CASK ex-fuel ex-Forex FTM to increase in the high single digits to early double-digit range, largely reflecting the impact of rupee depreciation in addition to the usual escalations. We remain mindful of the near-term challenges posed by elevated costs and continued volatility. At the same time, pricing remains supportive and our liquidity position is strong. We will continue to act with discipline, carefully managing capacity, allocating capital prudently, and protecting profitability while investing in opportunities that support sustainable long-term growth.
Kiran Thadimarri: With this, let me hand it back to Richa.
Richa Chhabra: Thank you, Willie and Kiran. Now, to answer as many questions as possible, I would like to request that each participant limit themselves to one question and one brief follow-up question if needed. With that, we are ready for the Q&A.
Operator: Thank you very much. We now begin the question and answer session. Anyone who wishes to ask a question may press star and 1 on their touchtone telephone. If you wish to remove yourself from the question queue, you may press star and 2. Participants are requested to use handsets while asking a question. First question is from the line of Binay Singh from Morgan Stanley. Please go ahead.
Binay Singh: Hi, team. The company is managing quite well in a pretty tough environment. Just two questions, one on PRASK and one on the wide-body announcement. On the PRASK side, when we talk about 25% plus in Q3, which implies the usual sequential jump, how are the customers responding to it? How are the load factors when you look into the Diwali week and all? Could you share a little bit about load factor outlook, both on domestic and international? The second is on the wide-body exit that we will do from November. What will be the impact of that on the spreads, PRASK minus CASK? Is that a positive impact? Anything you could share on that? Thanks.
Willie Walsh: I will comment first, and if Kiran has anything to add. We think load factors in the third quarter, and remember, it is seasonally stronger, will be flat during the quarter based on our current position and forward bookings that we are witnessing at the moment. In relation to the wide-body, let me hand over to Kiran.
Binay Singh: Sorry, this is flat on a YOY basis or on a quarter? Flat on a YOY basis.
Willie Walsh: Yeah, flat on YOY.
Binay Singh: Yeah. Great. Thanks.
Kiran Thadimarri: On the wide-body removal, we expect it to be accretive to spreads. This was always an investment case for us in the initial time period. It was just a prudent economic decision in the current geopolitical situation of extremely high fuel costs and currency depreciation. We would expect an accretion to the spreads.
Binay Singh: So any numbers on that? Will it be around 3% or so of your ASKs, so higher percentage of CASK? Is that the right way to see?
Willie Walsh: I don't think we give the exact figures, but just to remind you that in Q2, our domestic ASKs were broadly flat and our international ASKs were down about 2.9%. It is really looking at the international ASKs. But the decision to end that lease was an easy decision given the high fuel price, geopolitical issues impacting on the operation. As Kiran said in his opening remarks, we have learned a lot from the operation, which will stand us in good stead when we introduce the A350s in 2028.
Binay Singh: Great. Thank you.
Operator: Thank you. Next question is from the line of Arvind Sharma from Citi. Please go ahead.
Arvind Sharma: Hi. Good evening, sir. Thank you for taking my question. This quarter, you actually reported a fuel CASK, which was down quarter-on-quarter, a bit, not so much, but still down quarter-on-quarter. While you did highlight that ATF prices have been going up, what was the driver behind this slight decline on a quarter-on-quarter basis in fuel CASK? That was my first question. Second question would be on the winter schedule. Long-haul is down, as rightly said, wide-bodies are concluding. We also see more and more flights from the new airports, especially Navi Mumbai. Does that help you or does that impact negatively the profitability? Those are 2 questions, sir.
Kiran Thadimarri: Sure. Why don't I address the question on fuel CASK? As we indicated in the last quarter as well, the first quarter benefited from a 25% fuel cap that we had on domestic fuels, which the government had provided support for the aviation industry. That has come off effective 8 June. Post that, our prices are linked to market prices. That is the predominant driver for the difference that you see versus what you would expect. We have got a little bit of support from the government as well. There have been some VAT reductions for which we are thankful. These would explain the movement in the fuel price.
Willie Walsh: The new airports are very important to us in the long term. These are clearly strategically critical to support the long-term growth that we intend to pursue. Some of the charges are slightly higher, but to be honest, this is an investment in the long-term growth plans for the airline. We are very pleased to have the opportunity to move some of our operations to Navi Mumbai. I think that is going to help with our plans and enable the Mumbai Airport to redevelop Terminal 1, which is clearly in bad need of redevelopment.
Arvind Sharma: Got it, sir. Essentially, fuel CASK coming down is primarily because of government support and VAT reduction. Is my understanding correct on a quarter-on-quarter basis?
Kiran Thadimarri: Yes.
Willie Walsh: In the first quarter. The first quarter had a fuel cap that the government had instituted. They had supported the aviation industry by putting a cap on fuel prices to the extent of 25% over March prices. All of us were buying fuel in April, May, and up to 8 June on those capped prices. 8 June onwards, they have come off. From June to now, we have been buying at market prices.
Arvind Sharma: But they are still low quarter-on-quarter. Q2 is below Q1, the fuel CASK.
Kiran Thadimarri: Correct. Singjet has come down. What we are trying to say is the Singjet in Q1 was higher than the government prices on an overall basis, right? So that is why you would have a sort of price. And there was also volatility within the month. So if you remember in July, the prices would come down more significantly. So there is a little bit of volatility impact over there as well.
Arvind Sharma: One clarification on your guidance. On the 3% ASK growth in Q3, are the cuts more in domestic or international operations?
Willie Walsh: It will be more international in Q3. As you know, Q3 is very strong in the Indian domestic market, given the festive season.
Operator: Thank you. A request to all the participants. Please limit yourself to two questions per participant and region for a follow-up. Next question is from the line of Krupashankar NJ from Avendus. Please go ahead.
Krupashankar NJ: Good evening, and thank you for the opportunity. My first question is for Willie. Just a strategic question. Given that you have built a lot of full-service carriers, I want to understand how you see IndiGo balancing its low-cost core with its wide-body and long-haul ambitions.
Willie Walsh: Yeah, I do not really see it as being a particular challenge. I think where airlines have maybe got it wrong before is that they have accepted a compromise on their short-haul operation, given the expected contribution that short-haul feed makes to long haul. We are not going to make that mistake. Given the very significant short-haul network that we have in the Indian domestic market, I do not see any need for us to compromise on our short-haul model to facilitate feed into the long haul. We are very clear. We have a very low cost base today. That is going to give us the opportunity to expand into long haul off that low base.
Willie Walsh: We are not going to allow people internally to be distracted by the introduction into service of the wide body. The simple outlook for India, I think is very, very strong. I have been commenting on this.
Willie Walsh: Last year, 78 million international passengers in India. Heathrow had 79 million. So you had one airport in Europe with more international passengers than the country here. I think the long-term opportunity is very significant, and we want to participate in that. But we will remain absolutely laser-focused on our short-haul, low-cost operation and will not be distracted by anything that we need to do on the long-haul introduction.
Krupashankar NJ: Got it. The second question was largely on recent news that government is planning to use strong levers to prevent very sharp fare surges. Do you see any impact of this decision on peak season pricing and the overall free market pricing for the airline?
Willie Walsh: No, we do not see that at this stage. I think if there is a price stabilization fund that makes sense for us to participate in, then we will clearly look to do that. We would not do anything that would artificially impact on taking the right decisions given the high fuel prices that we are encountering today. So, if it makes sense, we will participate, and I give credit to the government for looking at an innovative way of trying to moderate the increase in the fuel price. Clearly, the terms of that will be the important issue for us.
Operator: The line for the participant dropped. Next question is from line of Sabri Hazarika from Emkay Global. Please go ahead.
Sabri Hazarika: Yeah, good evening. So first question is, how do you see the elasticity of demand right now in terms of given the increase in fare and increase in cost? Are you seeing some sort of stabilization? How do you see it?
Willie Walsh: Yeah, I think it is a bit early to call that on the basis of one quarter, which is traditionally soft in India. I have been very encouraged by what we have seen in the quarter and encouraged by what we are looking at going into Q3, and also encouraged by what other airlines are seeing across the world. So, this situation is not unique to us. I suppose what has hit us a bit harder than particularly the US carriers who are also unhedged, has been our depreciation of the rupee against the dollar. But when we look at the actions that airlines are taking, I think we are all taking similar action. I think we are looking at that balance between yields management and load factor to ensure that we are maximizing the revenue generation for the airline. But demand has held up pretty well.
Willie Walsh: And obviously we are going into a much stronger quarter with Q3 and have not seen anything in the figures to date that would suggest there is an issue there.
Sabri Hazarika: Got it. Second small question. Any reason why other expenses have fallen sequentially?
Willie Walsh: Craig?
Kiran Thadimarri: I think there is a little bit of accounting grouping play over here to the tune of about INR 178 crores. There is a little bit of a classification issue which makes it on a full one edge basis squared up. So that is what sort of what is causing it. There is a little bit of offset of that because of airport handling costs, which have increased primarily due to higher international departures in the second quarter. I mean, if you want the details of this
Sabri Hazarika: No, it is fine. Yeah. Thank you so much and wishing the new team all the best.
Kiran Thadimarri: Thank you.
Operator: Thank you. Next question is from line of Prateek Kumar from Jefferies India. Please go ahead.
Prateek Kumar: Yeah. Hi, good evening. I have a couple of questions. Firstly, on your CASK ex-fuel ex-Forex guidance of higher single to low double digits. Your H1 numbers for this is around 13%, which is, I guess, higher than low double digits. So we are looking at sharp moderation on year-on-year basis in H2 or should we work with a 12% kind of number only for full year?
Kiran Thadimarri: So the primary reason for a higher Q2 would be like we've been talking about having a disciplined approach to capacity. As we mentioned, we are looking at capacity increases to come up in the H2. So the utilization will catch up is what we're expecting and that's why we're calling a late single digit, early double digit on an overall year basis.
Prateek Kumar: Okay. So it can still probably end at a midpoint at, let's say, 10%, which implies around only 7% to 8% year-on-year growth for H2 versus 13% in H1.
Kiran Thadimarri: Sure.
Prateek Kumar: Yeah. Okay. The other international exit from widebody could also be contributing to these assumptions, I would agree.
Kiran Thadimarri: Correct.
Prateek Kumar: Other question.
Kiran Thadimarri: A stop decline or conclusion of the international operations with Norse would be accurate.
Prateek Kumar: Sure. The other question is on this exit from widebody international. Does this impact your preparedness for when you start launching XLRs because you lose, I do not know if you lose a London slot or a Heathrow slot or some other slots. The other related question is, are you also reviewing your aircraft delivery schedule with Airbus?
Willie Walsh: The exit does not have any impact. We are using the XLR to maintain the slot at Amsterdam. There is no longer term impact as a result of the termination of the Norse wet lease. It will not impact in any way on our plans going forward.
Prateek Kumar: Okay. Another question.
Willie Walsh: Sorry, you had another question?
Prateek Kumar: Are you reviewing the fleet?
Willie Walsh: Oh, in fleet? No. We are not reviewing the fleet. Obviously, like every airline, there are some delays to the delivery schedules from Airbus. But no, we are still committed to the fleet orders that we have and looking forward to taking delivery in 2028 of the A350s.
Prateek Kumar: Great. Thank you. These are my questions.
Operator: Thank you. Participants, kindly limit to one question and one brief follow-up, and rejoin for the next question. Next question is from Pramod Kumar from UBS Securities. Please go ahead.
Pramod Kumar: Yeah. Thanks for the opportunity, and welcome the top management to the new role, and wish all the best for the future. My question is regarding the capacity reduction we have seen in Q2. Given that we continue to add aircraft quite aggressively, what is the framework you are using that decides how do you add back capacity over the next few quarters? Is it a particular fuel yield or margin threshold? I just want to understand what the framework, which will guide you.
Willie Walsh: Well, obviously, we have got a very strong team who will look very carefully and take a prudent approach to the addition of any capacity. We will clearly do a detailed network analysis. It is really on a flight-by-flight basis that we are looking at capacity. I think the measures we took in Q2 were proven to be, or have proven to be absolutely right, and we will continue to apply that discipline as we go forward. We do see much stronger demand in the Q3 to the seasonally soft Q2 that we have just come out of.
Pramod Kumar: Is there any particular numbers you guys track internally which will guide the expansion? Also related to that, could this also affect our FY, the next fiscal growth plans as well, the exceptionally high fuel prices, if they do not kind of normalize very soon?
Willie Walsh: To be honest, I have no idea where the fuel price is going to be in a couple of months, never mind next year. What I can tell you is historically, as you know, the industry tends to adapt to the fuel price. If the fuel price moves to a structurally higher level, and I think for jet fuel, it is particularly in relation to the crack spreads, we have seen
Pramod Kumar: Yeah
Willie Walsh: crude prices moderate a little. They are in or around 110, 115, but it is the crack spread that has been significantly elevated. I think some of that is down to the disruption in refining capacity, which should be corrected over time. Historically, the crack spread has been around 20%, over 20%. This year it will probably average around 60%, 65%. While we would expect maybe to see some elevated crack spread, I do not think we will expect to see it at such high levels going. Whatever the fuel price will be, the industry traditionally adapts to that change in the fuel price because it is such a key element of the overall cost base of the industry.
Pramod Kumar: Fair enough. Thank you. Best of luck.
Operator: Thank you. Next question is from Jinesh Joshi from PL Capital. Please go ahead.
Jinesh Joshi: Yeah. Thanks for the opportunity. Sir, I have a question which does not necessarily pertain to this quarter, but with respect to the ASKM guidance of 300 billion by FY30 that we gave some time ago. Given our H1 performance and the guidance that we have given for Q3 that is in early single digit, perhaps we may end the year with an ASKM of, say, about 178 to 180 billion. From that base, if we have to reach 300 billion by FY30, the essential CAGR that we have to deliver has to be in the band of about 18% to 19%. Just wanted to know what are the key drivers of growth here, given the fact that in domestic markets, we have peaked out in terms of market share.
Jinesh Joshi: On the international side, given the current scenario where we are kind of slowing down a bit. How to think of the growth lever with respect to achieving the long-term guidance that we gave?
Willie Walsh: Yeah, look, there's a lot of moving parts, but at this stage, I am happy to stick to the long-term guidance. I do not see any change in our long-term approach to the business. We are starting with a very strong foundation. We are uniquely positioned in having fleets and aircraft deliveries that are well-positioned over the next few years. That gives us the opportunities to grow. There are lots of markets that we are not participating in today, that we can participate and where we see significant growth.
Willie Walsh: We are all the time looking, not just at the domestic market, which is clearly important for us, but also our ability to expand into international markets. I mentioned about the industry adapting to fuel prices. I think the industry also adapts very well to geopolitical issues. We find our way around these issues. It may take a little bit of time.
Willie Walsh: We may have to incur some short-term challenges and some short-term noise. But the long-term remains very positive in terms of the outlook for India. I would say nothing in my short time here, and my knowledge of the industry, I have seen nothing that would cause me to say that those long-term targets are not achievable.
Jinesh Joshi: Sure. Sir, one last question from my side. I think this was asked earlier in the call as well, but just wanted some clarity on this bit with respect to the load factor and yield movement that we have seen in Q1 and Q2. For example, in this quarter, our load factor was down by about 220 basis points, while the yield was up by about 34%. Even in Q1, we saw a similar environment wherein yield jump was quite high, and we saw a 130 basis points decline in the load factor. Just wanted to get some sense on this bit. Is it fair to assume that the current repricing that we are seeing due to ATF inflation is having an impact on demand, as evidenced by the declining load factors?
Jinesh Joshi: The moment the crude settles, we may revert back to our original pricing in terms of yield. Your thoughts on that?
Willie Walsh: Well, the critical issue is the revenue. That obviously, as you know, is a combination of both the yield and the load factor. We look at the trade-off all the time, not just across the network, but we will take a view on every part of the network that we are operating on. I will give you one example. We see opportunities to generate additional revenues through the premium product that we have introduced. In the second quarter, it is small. We will be growing on this. That is something that we have not seen historically, but I think the early indications of the performance of the Stretch products, which I think is excellent, gives us reasons to be optimistic there. That is going to be a feature of the business going forward. Obviously, the other thing we need to look at is our ability to generate ancillary revenues.
Willie Walsh: It is not just a focus on the fare, it is on the total revenues that we can generate. We believe that there is scope for us to increase our average ancillary revenue per passenger as well as we go forward.
Jinesh Joshi: Sure. Thank you. Thank you so much.
Operator: Thank you. Next question is from the line of Ankur Periwal from Axis Capital Limited. Please go ahead.
Ankur Periwal: Yeah. Hi, sir. Thanks for the opportunity. First question on your thoughts on ASK growth for financial year 2028, given that the aircraft deliveries have been slightly back-ended. I am combining the international expansion here, given that most of the incremental supplies were supposed to be absorbed in international. Given the fuel volatility, is there a possibility that ASK growth could be slightly back-ended even next year, given the fuel-led volatility and the macro?
Willie Walsh: We keep all of this under review. I think we have demonstrated our flexibility during Q2 and also our ability to move quickly to respond to any opportunities or challenges we see. So right now, we are not changing the financial year 2028 growth guidance of mid-teens, but clearly we will keep that under review. The aircraft deliveries are coming. There may be some short-term delays to some aircraft given some of the issues we see with the OEMs. We are looking at more than one per week. So we can, and we have played with utilization as we have gone through this year, and we will continue to look at that. So all of our decisions will be taken to ensure that we take a prudent approach to the growth that we are adding to the network.
Ankur Periwal: Sure. Just one follow-up there on the non-fuel CASK inflation. This year, we are expecting high single digit, low double digit. But what should be a steady state number here, let's say by 2028 onwards?
Kiran Thadimarri: Like I mentioned before, we are talking about early double digit or late single digits. It is a combination of two things. It is a combination of foreign currency depreciation, which is very, very sharp this year. And then there is the regular inflation which you have seen the last many years, which is in early single digits or in that range. That will sort of continue.
Ankur Periwal: Okay, sure. Thank you. My question was more on FY 2028. While I appreciate your comment on the current year inflation, but more on a steady state basis, 2028. INR depreciation may continue, but-
Kiran Thadimarri: Structurally
Ankur Periwal: Yeah, structurally.
Kiran Thadimarri: Yeah. If you back that out, as I said, the mid-single digit range is interesting, right?
Ankur Periwal: Okay. Sure. That's helpful. Thank you, and all the best.
Kiran Thadimarri: Thank you.
Operator: Thank you. Next question is from the line of Joseph George from IIFL Capital Services. Please go ahead.
Joseph George: Thank you for the opportunity. The question that I had was, now when you look at the pricing lever that you have exercised, say, this quarter and projected into Q3, it is pretty significant. We are talking about a 30% kind of an increase in yield.
Joseph George: Even though it is at a small cost in terms of volumes. Theoretically, if crude were to fall back to say $60 or $70, the scope for improvement in profitability is immense, that is, if you maintain current pricing. So in that kind of a situation, what is the guiding factor you would look at maybe in terms of sustainable spreads, that you would like to operate at?
Willie Walsh: Well, the first thing I would say, it is not the crude price that is going to really impact us, because as we have said, jet and crude have somewhat diverged. We are not seeing the same movement in jet as we see in crude, principally because we have seen widening crack spreads. So we clearly have to be much more focused on the jet fuel price rather than the crude price. I think if crude price comes down, that will probably play into lower general inflation, which would be a positive, given the impact that inflation would have on disposable income. So I would see that as a positive for us. So, we will continue to monitor the fuel price and take pricing action that we think is appropriate in the environment in which we are operating.
Willie Walsh: Obviously, we will be looking at what other airlines do around the world, because I think we are all responding in pretty similar ways. Going forward, we see opportunities, as I mentioned earlier, to grow revenue contribution of the premium products and opportunities to grow the contribution that we get from ancillary. The other thing we have seen in the Q2, which I think will continue in the Q3, has been strong cargo performance. Now, obviously with the departure of the 787s, that will impact on the cargo that we can carry on long haul. But the underlying trends on cargo have been encouraging as well.
Joseph George: Sure. Just one follow-up, on the ATF bit. If I look at the average ATF in Q2, could you guide us on where that number would be compared to Q2 as things stand today? Maybe the average for October, some guidance there based on the current crude and jet fuel.
Kiran Thadimarri: Well, I think this will move in line with the benchmark indexes, like Singjet and currency changes. That would be the guidance. Obviously, we cannot talk to specific terms with purchase prices and things like that. But largely, the differential would follow the Singjet benchmarks.
Joseph George: Sure. Okay. Thank you.
Operator: Thank you. Next question is from line of Achal Kumar from HSBC. Please go ahead.
Achal Kumar: Yeah. Hi. Thanks for taking my question. First of all, I wanted to understand a bit more about the domestic market. You mentioned that demand is very strong in the domestic market. Then obviously, you have tier 1, tier 2, tier 3 cities. Tier 1 is more, have strong penetration from the cargo, sorry, from the corporate, which are least price sensitive. But tier 2, tier 3 is actually more leisure, where IndiGo has a very strong presence as compared to your peers. Now with the higher fares, of course, tier 1 will still continue to sort of travel and you will see more demand strength. But how do you see tier 2, tier 3, and have you done, or are you thinking about doing any sort of network restructuring within the domestic market? Any color on that, please?
Willie Walsh: Yeah. I do not see any need to do any major restructuring on the domestic market. But you have highlighted our approach to reviewing our capacity. Obviously, if we see any softness in certain areas, we can adjust capacity there. That is pretty much the approach we took during Q2, and we will continue to do that. We will be very agile in terms of how we manage our capacity. We will make corresponding adjustments, both positive and negative, depending on where we see the demand. I think that is one of our strengths. We are able to respond very quickly, and I think the measures we took in Q2 had a positive impact on the overall financial performance of the business. We will continue to do that as we go through Q3 and Q4 as well.
Achal Kumar: Right. Then I have a follow-up on the products, different products which IndiGo launched recently, including your loyalty, including your business class, and including ancillaries. How has been the performance? Of course, the business class has not been performing so well, your Stretch product on some of the routes. International was doing great. Now, can you please give a bit of a color in terms of how these products are doing, and what kind of potential upside do you see, especially in ancillary? The land where you are coming from really has a very strong ancillary revenue. But in India, I think there are some government restrictions, so there are some limitations where they can reach. Can you please give a bit of a color on all that, please?
Willie Walsh: Yeah. No, you are right. Like the European environment, if you look at Ryanair's ancillaries, I think they are about 5, 6 times the average ancillary revenues per passenger that we generate. Much of that is because of what must be offered as part of the fare in India compared to Europe. But we have seen growth in the per passenger ancillary during Q2. It went up from about INR 525 to INR 590, which is encouraging, and I think there is still scope for further development in that. Obviously we are only scratching the surface of the contribution that loyalty can make. It will take us a bit of time. But when you consider the number of members that we have now coming up close to 20 million, the ability to generate additional revenues through a structured program there.
Willie Walsh: We have brought in a new leadership there, very encouraged by the early developments. If I look at the premium, the Stretch product, it is actually very encouraging. I think we have probably been a bit shy about promoting the product in the premium market. I think it is an excellent product. More and more people are getting to know about it. People are very encouraged when they experience it. The research we have done is encouraging. The figures on international are very positive as well. Without question, there is scope for growth in those three segments, premium, ancillary revenues per passenger, and in the longer term, loyalty.
Achal Kumar: Okay, perfect. Thank you so much.
Operator: Thank you. Next question is from the line of Aditya Mongia from Kotak Institutional Equities. Please go ahead.
Aditya Mongia: Yeah. Thank you for the opportunity. My first question was, especially on the interplay between pricing strategy and your capacity. The context is that some of the US majors have started talking about ensuring that their capacity planning depends on where crude is, with the endgame of maintaining price points in the market from where they are today. You talked about near term following this kind of strategy within the next one, two quarters. Thinking about FY28, what are your thoughts on continuing to tinker with capacity additions so that the pricing in the market remains pretty much where it is at this point of time?
Willie Walsh: I have heard some CEOs say, they are going to keep the prices where they are, even if the fuel price falls. Nice thing to say. I think it is going to be challenging to implement. I have heard CEOs say that before. My experience is there is almost a direct correlation between the fuel price and ticket prices. As fuel prices go up, ticket prices go up. As fuel prices come down, ticket prices come down. Not exactly in line, but there is a correlation there, and I would expect to see that continue. I think what we have seen so far this year has been very encouraging. We are going to continue to be prudent. We look at the reaction to the markets when we do make adjustments to the price, be that in the price or in the fuel surcharge.
Willie Walsh: But the bottom line, and we have been saying this very publicly, there is no way you can avoid increases in fares when you see such significant increases in the fuel price. It is inevitable that the fuel price will ultimately get passed through to consumers. That is the reality of the industry. The response that you should expect to see will be similar to everybody participating in the industry, because everybody ultimately has to pay the same price for fuel. Even if you look at the airlines in Europe that are hedged, their hedging will start expiring. So while maybe European consumers have not seen the same degree of fare increases on the short-haul, you have heard Michael O'Leary talk about unprecedented increases in fares next year.
Willie Walsh: What that reflects is the fact that the fuel hedges that the likes of Ryanair, EasyJet, and Wizz have in place will start unwinding.
Kushagra Bhattar: Got that. Second question, the final question from my side. Again, wanted to get your views on this aspect. There have been talks of airports being allowed to be owning airlines in the country. I wanted to get a sense that if this was to become an eventuality, how do you think through the risks that emanate IndiGo in the very near term, and then maybe over the medium term as well?
Willie Walsh: No, I think the issue there is there's a clear conflict of interest in terms of an airport that owns an airline and slot distribution. I would expect regulators to look very closely at those. This is a brutally competitive industry, and we've got a lot of experienced airline people who are doing a great job, but running airlines that are very efficient and not making money. If airports want to do that, if they want to lose money, I'd suggest they reduce their prices, actually. Maybe that'd be easier if they want to give money away. Why don't they give it to the customers that are using their airports at the moment rather than do something that's not necessary?
Aditya Mongia: Got that. Thank you. Those are my questions. Thank you.
Operator: Thank you. Next question is from the line of Kushagra Bhattar from CWC Advisors. Please go ahead.
Kushagra Bhattar: Yeah. Hi. Thanks for the opportunity, and welcome to the new management. A strong show on the pricing. Just two questions. One is, if you can give some more color on, let's say, how many of your bookings came from the BluChip members? A related thing would be, let's say, if you can give us some more sense as to the base has already reached to 20 million, but let's say the top 2 million unique customers would be contributing meaningfully, given they would be high-frequency customers. So a color on that will be really helpful. I have a second follow-up question as well.
Willie Walsh: Yeah. It is still very early days, and I think some of our early figures may not give you an accurate assessment of where we see the long-term value. I know from my previous roles that this can be a very significant contributor to revenue. What you tend to find is active members tend to book and generate revenue that are multiples of what the sort of casual engaged customers are. I think it would be too early for me to give you any figures that would be meaningful. We do have, as I said, around 20 million. The challenge or the opportunity, actually, it is not a challenge.
Willie Walsh: The opportunity is to turn those members into active members and to develop a scheme that is attractive for them and encourages them to fly with us, to earn points with us, and to redeem those points with us and with our partners. We are going to follow the same business model that has been so successful with other airlines, including my experience at IAG through Avios. We will certainly give you a lot more information on this as we go forward, but it is very early now.
Kushagra Bhattar: Sure. Got it. A second question would be if you can give more color on the pricing and the utilization. You gave a lot of color, but let us say, if you can give us more sense on how the pricing and utilization trended out in the domestic market between the three segments, which you generally call out on your investor day. Metro to metro to non-metro, and between, let us say, non-metro to non-metro. Where the revenue maximization worked out best for you versus your own expectations between these three sub-segments will be really helpful. A related question would be how much of the yield increase would have come from increasing share of the premium products would be really helpful. Yeah, that is it from my side. Thank you and all the best, guys.
Willie Walsh: Yeah. No, on the second one, it was not meaningful. What I am talking about from the premium product is where we see the contribution going forward. That is why you may have seen we had an advertising campaign around Stretch. I think it started last week and it finishes up. That is why we are encouraged by what we are seeing there. Actually, the experience was pretty consistent right across the network during the Q2. We will keep that under review. It was encouraging what we saw, and it was pretty consistent on the three segments that you have called out.
Kushagra Bhattar: All right. Thank you, and all the best.
Operator: Thank you very much. Ladies and gentlemen, we will take that as a last question. On behalf of IndiGo, that concludes today's conference. Thank you all for joining us, and you may now disconnect your lines. Thank you.
