IndiGo reported a net loss of 26.62 billion rupees ($280.2 million) for the quarter ended March 31, reversing a profit of 30.73 billion rupees in the same quarter a year earlier. The carrier said on Friday that the quarterly setback has prompted management to assess whether hedging jet fuel would be an appropriate response to recent cost volatility.
Chief Financial Officer Gaurav Negi told analysts on a conference call that the airline will examine the merits of fuel hedging in light of the developments over the past three months. Currently, IndiGo does not use fuel hedges. Industry practice for airlines typically involves financial contracts that lock in fuel prices to limit exposure to abrupt spikes and to create more predictable operating costs. Jet fuel is commonly the single largest expense line for airlines worldwide.
The airline attributed the quarter’s performance to several factors: capacity curbs that constrained operations, a weakening rupee and rising input costs. Management noted that a majority of IndiGo’s cost base - more than 60% - is denominated in U.S. dollars, which magnifies the impact of currency depreciation on reported expenses. A softer rupee increased the company’s costs by 31% during the period.
Foreign-exchange movements had a sizeable impact on the company’s financials. IndiGo posted a foreign-exchange loss of 48.82 billion rupees for the quarter, a stark reversal from a foreign-exchange gain of 1.38 billion rupees in the comparable quarter a year earlier.
Separately, management linked recent increases in jet fuel prices to rising crude oil levels associated with the Iran conflict, saying the surge in global jet fuel costs is a significant contributor to the deterioration in results. Given these dynamics, the company said it will consider whether entering hedging contracts could help cushion future fuel-price shocks.
The company’s comments underscore the twin pressures of commodity-driven input costs and currency translation effects on airlines with large dollar-linked cost bases. IndiGo’s next steps on hedging will be monitored by investors and analysts as the carrier evaluates tools to mitigate volatility in fuel costs going forward.