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Indian airline IndiGo doesn’t count on profitability till 2022

According to the CEO of InterGlobe Aviation, which operates the airline, Indian low-cost airline IndiGo does not expect any profitability in the next 18 months.

The airline currently flies at around 32% of its capacity, said Ronojoy Dutta on Friday.

IndiGo is one of the largest airlines in the country with a fleet size of 274 aircraft as of June. There are also international flights.

"It will be very difficult to be profitable at this low level of flight. However, our plan is for us to reach 75% capacity early next year. Once we hit that number, we see a better chance of becoming profitable." "Dutta told CNBC's" Street Signs Asia ".

"We won't be profitable for the next 18 months I think," he said, adding that the focus right now is on positive cash flow.

The company announced earlier this month that it will raise up to Rs 40 billion ($ 534 million) in funds through a qualifying institution placement, which will enable public companies in India to raise funds from accredited investors through the issuance of shares without going through a lengthy regulatory process.

"We assume that we will be 85% capacity by the middle of next year and that India will be a little different from other mature economies," said Dutta.

He stated that the chances are that the top-end customer segment, which mainly includes business travel, will be a long-term success. However, this should be offset by increased demand in commercial air traffic.

An undelivered Airbus passenger jet operated by IndiGo on the tarmac at Toulouse-Blagnac Airport on May 15, 2016.

Bloomberg | Getty Images

Indians mostly travel out of the state by train, which can take days to reach their destinations. This gives low-cost airlines like IndiGo and others a chance to sell cheap flights that can cut travel time.

The coronavirus pandemic has resulted in an almost complete collapse in air travel demand, forcing airlines to cut costs by suspending flight routes, laying off staff and reducing their fleets.

Last month, InterGlobe Aviation recorded a pre-tax loss of Rs 28.42 billion ($ 379 million) for the three months ended June, compared to a profit of Rs 15.09 billion the previous year. Revenue declined more than 91% in the quarter after flights were suspended for almost two months when India went into a national lockdown.

IndiGo also announced it is laying off 10% of its workforce, and senior management, including Dutta, has made a pay cut.

"We are constantly reviewing our cost structure. We have taken some painful steps in personnel costs. At the moment we have no plans to go any further," said Dutta. That could change if business conditions continue to deteriorate due to the pandemic, the CEO said.

India is one of the worst hit countries in the world, with more than 3 million reported cases. According to the Ministry of Health, a significant percentage of those affected have been fired.

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