InterGlobe Aviation Limited ($INDIGO)

Good evening, ladies and gentlemen, and welcome to IndiGo's conference call to discuss the fourth quarter and fiscal year 2026 Financial Results. My name is [indiscernible], and I will be your coordinator. [Operator Instructions] As a reminder, today's conference call is being recorded. [Operator Instructions] I would now like to turn the call over to your moderator, Mr. Richa Chhabra, Head of Investor Relations at 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 2026 Earnings Call. We have with us our Managing Director, Rahul Bhatia; and our Chief Financial Officer, Gaurav Negi, 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 the [indiscernible] the transcript of the Q&A session will be uploaded subsequently. With this, let me hand over the call to Rahul Bhatia.

Good evening, everyone, and thank you for joining us on this call. We announced our fourth quarter and financial year 2026 results today. This quarter, we reported a loss of INR 25.4 billion and for the financial year ended March 2026, a loss of INR 23.9 billion. As you are aware, the past year has been one of the most demanding periods for the Indian aviation industry. We navigated a landscape shaped by repeated external disruptions. The year-end reinforce that disciplined execution and organizational resilience remain fundamental to sustaining operations in a volatile environment. Gaurav will discuss the financial outcome in detail in a short while. First and foremost, let me address the events of December with [indiscernible]Not only did the December disruption caused a significant impact on our results. What transpired fell short of the standards we set for ourselves when we began this journey in 2006. Our customers deserve better. We are committed to the service standards we set for ourselves and the customer promise that has differentiated in nivo over the years. I'm grateful to the 123 million customers who chose to fly with in vivo during the financial year and for the patient's understanding and part your trust during the disruption. At the same time, it is important to acknowledge the extraordinary professionalism, resilience and sense of responsibility, demonstrated by our frontline colleagues and operational teams in exceptionally demanding circumstances. The commitment and dignity under pressure truly reflects the spirit of Indigo. My colleagues worked with unwavering commitment often through long hours, intense pressure and considerable personal sacrifices to stabilize operations, restore system integrity and bring the airline back to normalcy. I'm equally grateful to our broader stakeholder community, including the government of India, the regulators, airport operators, partners and suppliers for their strong cooperation and support through this difficult period. Since December, we have further strengthened resilience and execution discipline across the airline. This is evident in outcomes with us consistently leading in on-time performance across the last quarter, clearly demonstrating the speed and effectiveness with which operational efficiency has been restored. Further from March onwards, the escalation of geopolitical conflict in the Middle East has led to several route disruptions and the sharp increase in jet fuel prices. In response, airlines globally, including Indigo, we're required to take certain short-term measures to protect operational liability. As IndiGo stepped into its next phase of growth, scale and global expansion, we have taken decisive steps to further strengthen our leadership. During the quarter, the Board has appointed [indiscernible] IndiGo's new Chief Executive Officer, and he is expected to join us from early August. Willie brings over 4 decades of deep global aviation experience. His proven leadership positions IndiGo [indiscernible] its next stage of evolution. Alongside this, we have continued to build the leadership depth across the organization with the appointment of [indiscernible] as the Chief Strategy Officer. As Indigo grows, we are strengthening leadership across the organization, investing in people, building depth and placing accountability close to operations. Ultimately, the progress we make at an airline will be driven by our people. Whilst the current external environment remains uncertain and volatile, Indigo's long-term direction remains unaltered. We continue to execute our strategy with discipline and consistency remaining focused on the long-term fundamentals and opportunity. And we allow me now to hand over the call to Gaurav to discuss the financial performance in detail. Thank you.

Thank you, Rahul, and good evening, everyone. Looking back at the financial year 2026, it was shared by a series of external and operational challenges across. The first quarter was impacted by geopolitical developments in the Indian subcontinent that affected capacity deployment and operating conditions across more than 10 airports in India. The second quarter is a seasonally soft quarter for all the industry. And during that period, we took a deliberate call to rationalize capacity in line with the market. The third quarter was the most challenging for us operationally as the disruption in December impacted our performance. In the fourth quarter, just as the demand was normalizing, the developments in the Middle East introduced trend disruptions through air space constraints, network challenges and selective travel betas. With this background, both our capacity deployment and demand were impacted. Against [indiscernible] growth of around 5% passengers grew by around 4%, and we clocked an ASK growth of 9.5% with an RPK growth of 7.5%. Despite these challenges, we [indiscernible] more than 123 million passengers in FY 2026, the highest ever. Now for the financial performance, starting with the full year ended March 2026. On a consolidated basis, we reported a total income of around INR 895 million a growth of 6.4% versus the last year with a net loss of INR 23.9 billion. The primary driver of the loss was a significant impact of foreign exchange movements where the rupee has depreciated by more than 11% against the U.S. dollar in just 12 months, one of the steepest decline in many years. Additionally, we reported extensional items in Q3 and Q4 on account of adoption of the December reduction and the new [indiscernible]. Despite significant eternity fee, if we have one analyze the financial performance, excluding the impact of foreign exchange and the exceptional item, Indigo delivered an underlying net profit of INR 75 billion in FY '26 as compared to INR 89 billion in FY 2025. Further all in addition to the INR 5.8 billion reported as an exceptional for the December disruption. As per our assessment, we had an incremental impact of approximately INR 15 billion to INR 16 billion on account of lower capacity and reduced unit revenues. Factoring these one-off events, our performance for the year would have been meaningfully stronger and as compared to the prior year. For the year ended March 2026, we reported an EBITDA excluding the impact of foreign exchange movement of INR 231.9 billion with a margin of 87.3% compared to an EBITDA of INR 22.6 billion with a margin of 28.3% during the year ended March 25. Now moving to the fourth quarter performance. The first 2 months of the quarter reflected a clear operational recovery for Indigo following the disruption experienced in December. Network stability improved materially. -- schedules were brought back in line progressive and operating discipline was reestablished across the system. In terms of the demand environment, first half of January continued to carry some resi impact of the December disruption. While conditions stabilize through February, the demand was destructed again in March by the escalating geopolitical tensions in the Middle East. Again, to remind you, the point of comparison here is a very high base of last year due to the religious festival of [indiscernible]. The Middle East in developments have had a meaningful impact on our international operations disrupting flight to the region as well as to Europe. Together, these markets represent 18% of our total capacity and approximately 160 daily flights at this weigh on the utilization and the revenue towards the end of the quarter. On capacity, we are tracking broadly in line with our planned growth trajectory with the capacity going up by around 10% year-over-year through January and February. However, the escalation of the geopolitical tension in the Middle East led to flight cancellations and network disruptions and also impacted our operations to U.K. and Europe as well. As a result, our overall capacity growth for the quarter came in at 3%, which was lower than the initially planned capacity. For the quarter ended March 2026, we reported a total income of around 38 billion, an increase of around 3%. The EBITDA, excluding the impact of foreign exchange movement came in at INR 64.4 billion with a margin of 28.7% compared to EBITDA of INR 68.6 billion with a margin of 31% during the same period last year. The quarter had a net loss of INR 25.4 billion compared to a net profit of INR 3.7 billion during the same period last year. Again, to remind you the point of comparison here is a very high base of the last year due to the relative festival of [indiscernible]. At the quarter end, the rupee depreciated sharply by around 5% against the U.S. dollar, resulting in a foreign exchange loss of INR 48.2 billion. As has been explained in earlier calls, the foreign exchange losses are largely mark-to-market losses and are primarily recognized on lease liability and maintenance approvals, which are long term in nature and payable over a period of 8 to 10 years from the cash flow standpoint. Additionally, as explained in the last quarter, the Government of India has consolidated multiple existing never registrations into our unified framework, comprising 4 new labor courts. We have evaluated the incremental impact arising from the implementation of the new labor court. And based on a revised estimate, we have recognized an additional impact of around INR 2.5 billion. The total provision for the financial year 2026 is INR 12.2 billion. Excluding the impact of on-exchange movement and exceptional items, we reported a net profit of [indiscernible] the March quarter versus a net profit of INR 29.8 million during the same period last year. As guided during the last earnings call, the passenger unit revenue perhaps came in at INR 4.46, which is 4 points lower on a year-over-year basis. This is largely due to the higher base of [indiscernible] in quarter 4 of 2025. Now on the cost side, fuel price volatility has been testified sharply following recent geopolitical developments in the Middle East. Benchmark jet fuel prices have spiked significantly over the past 3 months, materially impacting operating companies across markets. On the domestic front of our operation, this supported and frankly intimation by the government and the oil marketing companies and airports to significantly soften and partially passed on the impact of global fuel price increases. Not only does this enable us to calibrate our true charts, but also allowed us to respond to cost pressures in a prudent manner clarity for a large part of our business, there is a natural lag in reflection of fuel price movements. Aviation turbine fuel prices are notified by all marketing companies on the first of each month based on the prevailing international fuel price indices and currency movement of the last month. As a result, changes in the global fuel price trend tends to follow through on a fuel can with a roughly 1 month lag rather than a real-time basis. Ever fuel can for the quarter has not been impacted materially in Q4 2026 rather confused by percentage on a year-over-year basis, primarily driven by a reduction in benchmark singer jet fuel prices. The [indiscernible] for the quarter came in at INR 3.15, which is higher by around 7 percentage points compared to the same period last year. primarily due to inflated dollar-denominated costs due to depreciation of the Indian rupee at an average of 5 percentage as more than 50% of our costs are dollar denominated. Additionally, lower [indiscernible] utilization due to the airspace restrictions and the recent development in the Middle East has also impacted the Capex Forest. The annual contractual increases across line items such as airport charges and maintenance also added to the case ex ForEx. On the AOG situation. [indiscernible] related groundings are currently in the 40s and are expected to trend downwards by the end of the year in the 30s. At this point, we do not have further guidance from the OEMs beyond this point. While the operating environment remains volatile in the near term, our focus has remained firmly on disciplined execution on our long-term strategy. We have paid anchor to our core principles scale with discipline, enhanced balance sheet strength and invest selectively in areas that tend to franchise. On the fleet front, we are executing with 1 of the largest aircraft pipeline globally. During the financial year, we inducted 51 aircraft from our original book. In addition, we also invested 21 aircraft on table basis, thus adding 72 acres on a gross basis. We also redelivered 73 aircrafts from our original order book and 28 damp lease during the financial year, resulting in the fleet of 441-acre at the end of FY '26. On the network side, at the end of the fiscal year 2026, we operated 97% domestic and 45 international destinations. Over the last financial year, we have steadily expanded our international footprint with the announcement of new destinations such as the Union Island and Shanghai across new regions while continue to deepen our connectivity within India, including a new and underserved airports. During the financial year, we invested India's first A321 XLR. The A321 XLR is a central pillar of our international strategy. It allows Indigo to connect long on international markets directly from India. We have already deployed the XLR on services to high potential markets, such as patents and samples [indiscernible] and additional XLR aircraft [indiscernible] intend to progressively expand this footprint across select Asian and European destinations. Moving to the balance sheet side. We ended the year with a capitalized operating yield liability of around INR 535 million and a total debt, including the capitalized operating [indiscernible] of INR 777 billion. On the right to use absence at quarter end were around INR 521 billion. We continue to maintain strong liquidity as we ended the year with a total cash of INR 16 billion, of which INR 362 billion is free cash and restricted cash of INR 154 billion. Globally, if you look at most of the well-known carriers, they operate for 3 levels of around 20% to 25% of the annual revenue. Again, this global backdrop, our balance sheet strength and liquidity remains clear focused strategic advantage and allows us to invest today for the future. The total cash has increased by INR 437 million during the quarter as compared to profit excluding ForEx impact, an exceptional item of INR 19.2 billion, primarily due to cash utilization in the form of purchases of aircraft and also due to reduction in corporate sales. We have remained product in our capital allocation, prioritizing fleet, operational capability and long-term efficiency while protecting the balance sheet trend. Investments made during the year are aligned with strengthening the core operation and future growth. We are actively deploying free cash to accelerate aircraft loan prepayments and increase our trade ownership. During the year, we have announced a capital investment of $850 million in the [indiscernible] entity to be deployed primarily towards acquisition of aviation assets, and we have prepaid loans of 17 acres. With this, now we have 56 aircraft as uninterpreted assets in our book, aggregating more than million of book value. Additionally, we have 53 aircraft on finance leads with uterine ownership, and this investment also adds to our balance sheet strength. This is a strategic choice aimed at enhancing asset control, reducing risk and strengthening the durability of our balance sheet over the long term. We view this as an ongoing level and we continue to explore site opportunities with increased ownership, meaningfully [indiscernible] the balance sheet. Further, we've also prepaid some finance obligation towards our city entity, aggregating to around $450 million or INR 42.4 billion. Such funds will be utilized towards acquisition of aircraft and engines through our equity entity. We announced the development of an integrated corporate campus, reflecting our long-term investment in organizational scale, collaboration and operational effectiveness as we continue to grow and scale. It reflects our confidence in the long-term growth of the business and intend to be durable institutional infrastructure. We continue to invest in our loyalty platform, the BluChip during the year. BluChip ecosystem has more than 11 million registered members and an banking relationships through multiple co-branded cards, such as SBI Cards, [indiscernible] and IDFC Bank. Hospitality and partnerships include the post-care and everyday sense and lifetime partners such as [indiscernible] and the [indiscernible] Duty Free. Our focus is on building asset-light programs and strengthen the customer ecosystem and support revenue quality over time while remaining economically disciplined. Further, given the financial performance of the year, and the position of distributable reserves, we have decided not to recommend a dividend for FY 2026. With the capacity deployment in the last 2 months, where in Middle East has seen an upward trajectory through April and May, we are expecting to add capacity of around 3% to 4% in the Q1 quarter of 2027 as compared to the same period last year. Further, on the revenue side, based on booking and pricing trends observed across April and May, we currently estimate a mid-teens improvement in the unit passenger revenue in quarter 1 of FY '20 27 versus the quarter 2026, [indiscernible] driven by calibrated fuel charges, which have been imposed and a lower pace during the same period last year due to geopolitical developments in the India subcontinent. However, it's equally important to note that the costs have also become more elevated, driven by higher fuel prices, significant rupee depreciation and contractual escalation, which are annual. Further, as we enter into a seasonally softer demand environment from mid-June onwards, combined with elevated fuel levels, we are adopting a measured approach to optimizing capacity. As part of this selective recategorization of certain routes is warranted to protect margin as was done last year as well. This optimization will involve reducing the usage of older generation aircraft and returning certain narrow-body manned aircraft that are naturally more expensive. Additionally, we are also in discussions with our widebody AMI partner to optimize our long-term long-funoperations due to ongoing [indiscernible] and elevated fuel costs. On closing, while near-term conditions remain proved the strength of our network, cost discipline, balance sheet continues to support resilient operating fundamentals. We provide us with the confidence to stay on the growth in our long-term strategy, invest selectively and added quality was digital. As a result, we remain well positioned to deliver a consistent performance and long-term shareholder value. With this, let me hand it back to Richard.

Thank you, Rahul and Gaurav. To answer as many questions as possible, I would like to request that each participant limit themselves to 1 question and 1 brief follow questions if needed. And with that, we are ready for the Q&A.

[Operator Instructions] The first question is from the line of Binay Singh from Morgan Stanley.

Just picking up from the opening remarks when you talk about mid-teens the yield increase or revenue per percent. Are you able to fully pass on the cost pressures with that? If you could comment both on the international side and domestic side and also a little bit about how are the utilization rate when you say 3% to 4% growth, what is the breakup of domestic international. So that's it.

Binay, as you're aware, the fuel prices have gone up significantly. So effectively, the since went up by more than 100 points. While there has been an intervention and support that has been passed on both from the government as well as from the oil marketing companies, where the increase on fuel has been to the tune of 25% to 30%. On the international side, the fuel continues to be on much higher kind of scale at market prices. We did introduce a fuel charge to pass on some of those costs related to the increase that has happened. On the domestic side, we have managed to recover to a large part, the increased cost that is there, which is, like I mentioned, lower than what the market is. And equally, on the international side, we'll try to pass on a large part of the fuel increase. But not in its entirety has been -- we've been able to pass on the fuel charge. So one is balancing out both in terms of what the fuel charge and the base pipe needs to be along with the load factors that the revenue management teams are focused on. So the objective is to see how much of the cost can be recovered through these increased revenue. but we've not been able to completely kind of offset the increased fuel environment that we are in. [indiscernible] a tougher month, but what we've seen is at least for namings are relatively better in terms of the load factors. On the utilization side, yes, the utilization has been impacted because we had to cut a lot of our capacity going into the Middle East. So because of that, like at mentioned, close to 160 flights got impacted both for the Middle East as well as for Europe. That was largely around 80% of our capacity. While we did try to redeploy most of our capacity into the domestic out, given that this is a season largely for domestic, but we do see pressure on the utilization also, which is what is reflected in in the overall growth that we are expecting for Q1 2027. The mix, again, the mix tends to move around. On an average, it used to be 70% domestic, 30% to be international. But given Q1 is a more domestic heavy kind of a play given the seasonality the ratio is going to be most on the higher side towards domestic and less on the international and any which way International is largely the Middle East is something that we are still in the ramp phase. We are ramping back up again, the 160 flights that we had, especially with the war coming through, we had to cancel a large part of that. But today, that capacity is probably back to 2/3 of what we were. So utilization is lower, more capacity being deployed towards the domestic and ramp back up again in the Middle East, especially as we prepared for the Q2 season, which tends to be bigger on the Middle Eastern side than on the domestic side.

[indiscernible] graph number, where are the utilization rates on international now, like domestic data begets on international

So the cash -- utilization on a stand-alone basis is going to be [indiscernible] So we're trying to optimize praised. So the objective is to increase share given the fuel environment that we are. So we are trying to increase that. They were low, as I mentioned, especially with the prices that was being said especially in March and then April. May things are improving right now. I can't give you a firm number in terms of load factors, standalone for international.

Next question is from the line of Arvind Sharma from Citi.

You commented that we are mid-teen growth in unit revenue in the first quarter. That makes a fairly high number. So purely in qualitative terms, -- where do you think that demand is how elastic it is because a mid-teen number would be a very high risk cash yield in [indiscernible] so do you think that's impacting or when does it start impacting the absolute demand?

So when you look at [ graph ] [indiscernible] to remember what happened in Q1 of last year also because we were really impacted by the events that paid out, especially in May. So until April, the quarter was pretty strong. We had the [indiscernible] and then it followed to the May quarter last year May month was extremely weak. So that was the time when we were [indiscernible] having a very low both growth factors as well as the revenue environment. So when you do factor that into the base, the mid-teen increase is something which is seeming to be high. But on a base effect basis, it's not that significant. Couple that with also the fueling that have happened. So in a way, it's positive for us that the overall yields have gone up as well as the [indiscernible] is going up. But the base effect is low and the cost increases that we have in the month of both April and May are significant.

All right. And the impact on demand, if any?

May is coming out to be stronger. So again, with the base, April was soft because we were still in the ramp may coming out to be positive. And as a result, that's why you have the past at mid-teens level, which is a combination of both the yields as well as the load factor. So the demand is good for the month of the day.

Got it. And my second question would be on fleet strategy. yes, over the near term, the fleet tends to be a little less flexible. But are you seeing any change in the delivery schedule given the demand or change in flights that you're going to take?

We are looking at the capacity that we need to kind of put into production and operations. Our immediate attempt is to first kind of favor the damp lease because those are the ones which was mentioned in the opening aortas tend to be more expensive both in terms of the cost because there's an inherent kind of markup that is there. To us, some of them are not the most latest technology as a result, then to consume a lot more fuel. So that's the first kind of space that we are kind of addressing, we will return most of our dam leases, something similar that we had done last year also given a softer Q2 that within the cycle that we have then we are also looking at some of our older technology fleets that we have, which is the CEO. So we look at it given the fuel environment that we are in the [indiscernible] consume a lot of fuel. So we'll be looking at those. So that's our approach right now. there is no shift as far as deliveries are concerned related to order book. But our first attempt is going to be to address it both in a manner of returning the damp lease and then looking at if there are any kind of an older technology aircraft that may not need to be utilized as much. So -- and then we keep monitoring how the fuel environment works because if anyone gets in terms of how long this particular situation in the Middle East is going to last and then what the tail effect of that is going to be. So we will be a little more dynamic as far as our spread planning is concerned.

Next question is from the line of [indiscernible] from JPMorgan.

A two-part question on your CASK ex fuel, ex FX. So in 4Q, if I look at the line items, which comprise your ex fuel costs, given the disruptions given the currency depreciation, it seems that the cost inflation was quite well managed. If I look at lines like employee airport fees and even the supplementary rentals. Any mitigating factors that you have already deployed? And any color on the cost management. And the second part would be like you have been giving guidance last year, any guidance for the CASK ex fuel, ex FX trends for the quarter or for the year, whatever you are comfortable providing?

So we just -- so you're right, we've kind of tried to manage the cost dimension. But large part of the cost will also have an underlying FX impact, which will start flowing through because what we absorbed in Q4 was a mark-to-market impact to begin with the rupee depreciated. Going forward, that will also start playing into the [indiscernible]. Equally, the utilization aspects also that was discussed because the longer this contract continues and the lesser the deployment of our capacity is going to be that also has a denominator side because the [indiscernible] not going to be as much.

To defray our fixed costs related to that. While we've kind of seen a headwind that exclude ForEx, which is somewhere in the [indiscernible] we have guided, it's going to be somewhere in the mid-single digits. -- at least for the coming quarters and depending on how things play out in terms of our utilization levels also, we foresee that it's going to be in mid- to high single digits is what our anticipation is right now. But just bear with us because there's so much volatility right now across the environment that most of these kind of directional kind of view that we are sharing can change significantly depending on how long this kind of continues. We are making every measure that is there to see where we can tighten. Like I said, we are also kind of reducing fleet that is not the most efficiently we're looking at that space. Obviously, cost is a focus area always and even more so in this end environment for us.

And just you had provided a sensitivity of INR 900 crores for every USD depreciation. Can you provide the latest sensitivity? Or is this still the same?

The next is still the same. The good part is we had mentioned that we have started to do hedging begin some of this exposure. Our overall net exposure in dollar terms, somewhere comes out to be around $10 billion. We've done a hedging of around EUR 1.3 billion. So give the pill in that 900 trajectory right now for every rupee movement on the mark-to-market, right? So anything on the balance sheet. We've got a movement -- a INR 1 movement to do tends to translate into 900.

And that's what you would have seen in the Q4 performance also. The impact of FX is number around INR 4,800.

Next question is from the line of Achal Kumar from HSBC.

I have 2. The first one is on the yield going back to your comments on the mid-teens. So I just want to understand if you could please give color in terms of how much of it is coming because of fuel surcharge and how much is the underlying increase in the fares and because of that the yield is going? Can you please give a bit of color on that?

What I mean is the price guidance of teens, it has both the yield and below factors. So that's the bathing that the teams are going. So it's more a price guidance. Last part is obviously going to be fuel related because the fuel charge or the fuel cost that we need to kind of -- because the cost levels are any has gone up. So is the mid-teens will look quite positive but there in the cost level of the impact of fuel and the effect that we now need to absorb also is also equally significant. And that's why I mentioned that we are not able to absorb the entirety of the cost increases that are there. So this is on a brand level. We'll keep balancing between the yields and the load factor to try to optimize this.

Right. Second question was on the cost side. And on the cost, one part of it is about the salary cost because we thought you're going to hire more pilots because of the norms and the salary cost could go up actually. And we can see the Q4 and cost is actually lower than Q3. How is happening? And any plans on the few have you, please?

On the fuel taking that's under -- again, given the environment always the fun has run up significantly. There's obviously thinking that is going around in terms of developing similar to what we have developed on the currency side, but it's in early stages given that the fuel has already on up significantly. So we will be putting our minds to start looking at whether fuel heating is another option or given that we already have a significant fuel efficient fleet that we already operate as well as operationally to the extent we can minimize the fuel consumption. That's been the longest or the longest area of focus for us. But given what we've experienced in the last months now. That's going to be something that we'll probably start exploring. So not done yet, but something which is in its early internal dissipation.

Next question is from the line of Aditya Mongia from Kotak Securities.

My first question was more from the perspective of the pricing strategy of the company. Have in light of the few on the cost increase is a will the pricing be on hold by that or the extent of demand destruction that we end up happening? I think the underlying question over here is some that you want to [indiscernible] and the way costs are will be passed through independent of the [indiscernible] would this be slightly sensitive to what demand restructuring can happen.

Did they allow me to take this question. This is Rahul. So for us, it is very clear that we need to take shares up to protect ourselves against sort of these additional costs that are showing up. And for the moment, what we are discovering is that the fares are sticking. The demand is there. So you obviously have to take the pricing up to the point where you start to see elasticity come in. For the moment, what we are seeing is as we take the fares up, the market is inelastic to these hikes and fares. And we just deal with this on a daily basis and see where we go.

Understood. The second question that I had was more on what you rated earlier on I think this was the 1 on the cash aspect and a fairly base cash position and how it's going to be deployed. And there is a cost of aircraft ownership could you give us a sense of how much of that [indiscernible] costs can be mitigated over time as we use cash to good effect.

So [indiscernible], if you were to think of cash, which is sitting in the bank, you know what the returns on that is will range between depending which period would have. So that's the kind of return we get on our cash, which is sitting versus an aircraft which has lease rental value, which has a marine cost, which is much higher. So there's a natural arbitrage that does exist for one to start deploying the cash to start owning the assets because there's always some money in terms of financial cost that is involved in it. The second dimension, which is also becoming even more meaningful in the FX related. So the sooner you lock in an aircraft and are in the exposure related to the also kind of gets mitigated to some large extent also. So these are 2 dimensions that come into May as far as aircraft ownership is concerned, what is using cash or keeping cash with within the banks. Now having said that, I didn't mention in our opening pacing, given we are in an industry, there's always -- it's always prudent to keep at least 20% to 25% of your overall top line as a safety that's been our stated strategy that we are sitting on a lot of cash, around 20% to 25%, which is roughly around INR 20,000 crores to INR 25,000 crores give or take is going to be something we'll keep as a safety net. But anything above that, we'll start deploying towards acquisition of assets, which otherwise would have a much higher money cost to pay than what we will get as returns on those from the banks for the mutual fund steady.

Next. Question is from the line of [indiscernible] from UBS Securities.

Can you hear me?

Yes, now we can.

Sorry for that. Just clarifying for the employee cost, one of my colleagues, peers did ask the question as to why the employee cost just clarify that will be very helpful.

Sorry, what's the question?

The employee cost, [ Gaurav ], the sequential decline in employee costs, even with higher in and all what led to that? decline on a quarter-quarter basis.

If you net quarter-over-quarter sequentially, you think that there is some reversal that we've taken related to some accruals we were doing related to leadership payouts, which have been reversed now. That's why you see kind of a reduction on a sequential basis. Other than that, year-over-year, the cost would be growing in line with the normalized kind of inflation and increases that we have on the salary front.

Fair enough. And second question is on the corporate side, sir, because we've been hearing a lot of statements from companies publicly and privately that are there kind of picking the belt expenses, including travel. So -- and corporate travel has to the base business for investments. If you could just any [indiscernible]

Sorry, we are again losing your audio.

Sorry, is it any better, sir, sorry, I'm like -- or no, I'll come back in the queue.

Sir, were you able to get the question?

It was on the corporate towers. Corporate travel, any changes you're seeing or moderation you're seeing on the corporate bookings?

No. Like I said, May is coming relatively good. I have already given a bit of a guidance in terms of where we're looking at the price cap. So we are not seeing any kind of a softness. So I can't differentiate between corporate right now versus what is for leisure and purposes. But overall, May is coming better. April was off, but May is coming stronger.

Next question is from the line of Krupashankar NJ from Avendus Park.

My first question is on the international servicing. So I just wanted to get a sense around the long haul or the super year. I do understand there are distractions at this point. What do get a sense on whether we will continue to lease more wide bodies and continue to cater to new destinations on the international side, the far reach [indiscernible]

This is Rahul again. So what -- when you talk about all what markets are you talking about?

For example, last -- we started Manchester, Amsterdam, so something on those things. Probably in the Far East or other geographies.

Yes. I mean in this journey, we will continue to, on a daily basis, optimize the network to suit the current needs. What that will be tomorrow morning, we can't tell you, but the assurance we give you is that we continue to watch this very closely and to ensure that we are running an optimal operation. Understood. The second question is on the new domestic apples, which have in key metros. Just wanted to get a sense around the incremental capacity deployment in domestic do [indiscernible]

Sorry, we lost the audio. Can you hear us? Krupashankar can you hear us? Next question is from [indiscernible] Kumar from [indiscernible] India.

I have a couple of questions. Firstly, you talked about [indiscernible] of mid- to high single digit costly volatile. But is it possible to give something on ASK growth for full year as then you talked about first quarter 3% to 4%?

Not yet, [indiscernible] have to wait because we are not getting annual guidance right now, we began. So in due course, we'll also come up with that.

Sure. The question is on FDA situation. Is this largely addressed now? Or is there a major palette in terms of in situation, of course, capacity is on lower right now. But overall, from where in December industry was, is the situation eased in terms of availability and hiring?

Yes, our readiness in terms of TTM is complete, and we'll remain like that into the future.

Next question is from [indiscernible] Axis Capital.

First question on the capacity management when you alluded towards this. Just curious to understand the given the constraints on the international routes, this capacity you mentioned has been deployed on the domestic market. One, if you can highlight whether these are more metro or the non-metro routes? And combining this with your earlier comment that the fuel price increase, at least in the domestic market in the month of May give and take is largely done in terms of yield matching the increase in the ATF prices. So you towards there, please. So last part of the redeployment is on the domestic side and quarterly towards, a, the metro, especially the new airports that are coming up. We got both [indiscernible] as well as now will start in or going to be very proactive as that. To us, the large part, at least in the first quarter is going to be towards the leisure market in India because this being a seasonally the quarter for travel domestically. These are one of the towards leisure markets. Sure. Yes. The second part there was your comment on domestic yields largely matching the ATF prices well on the international, maybe on a route-specific [indiscernible] but on the domestic side, it's largely matching as the increase in ATF prices has been largely passed through.

Yes. Thanks to the fact that the increase on the fuel wasn't that big as we saw in the international side because we did get support from the government as well as the all marketing companies, we have the increase of only 25% to 50% vis-a-vis international where which was at market where they increase or more than 100%. So that's why we've been able to manage that relatively better, keep our prices, especially for the domestic season lower. Otherwise, the price increase would have been even higher. So -- so in effect, it's a tax event because the airports also held out in terms of the airport charges being deferred out. So a combination of both your marketing companies, the airports, the airlines or collectively working to make sure that the prices do not significantly increase for the consumer, especially in this period, which is Q1, which is big in domestic.

Next question is from the line of Sabri Hazarika from Emkay Global.

Firstly, one clarification is last guidance of mid-teens. This includes the [indiscernible] it excludes that?

Includes. It's all in and so would the foreign cost need for us also. So it includes.

Okay. Now coming to the question in terms of fuel prices, I mean there has been a lot of development, I think Delhi as well as Maharashtra, they have reduced the wheals significantly on [indiscernible] so do you see that it is that probably the peak of the full pricing where we are right now, at least right now. And I think they have not passed on, I guess, there has been no pass on of the lower debt or anything of that [indiscernible] so do you see fuel prices coming down here on? And from April until now, not too much of clarity is there exactly on what is the real fuel prices for the airline. So can you give some idea on that also.

Sabri, this is Rahul. This is work in progress. We are working between the Ministry of Civil Aviation and the Ministry of Petroleum and Natural Gas to come to an agreement into the future. And as soon as we have clarity, we would let you know.

Next question is from the line of Jinesh Joshi from PL Capital.

Sir, my question is on our hedging policy. If I'm not mistaken, our earlier policy was to hedge the cash flows falling due in the next 12 months. Now given the excessive volatility in rupees that we have seen of late, are we contemplating any change in strategy over here?

We are enhancing the policy that we had, and I mentioned the last time also, our initial going-in position to hedge was for the next 12 months and we had a goal of hedging up to $1 billion. Subsequently, we've increased that $2 billion to $3 billion. So we intend to hedge up to $3 billion. large part is going to be $1 billion towards the short-term cash flow hedges for the 12-month year. And the remainder of the $2 billion is going to be spent over the the 2-year to 5-year period. So we've kind of enhanced our policy. And as a result, today, we are at 1.3 and we'll continue to keep scaling this up.

Sir, one last question from my side. In the month of March, our international [indiscernible] was down by about 33% due to the Middle East prices. But I think number of the capacity loss would have also come because we might have canceled some of the flights, which probably are going through that route and now maybe the real team could have -- maybe the will have been in place. So just wanted to get some sense in April and May, how is our international capacity deployment shaping up? I mean is the situation better off than March? I mean if you can throw some color on that?

Yes. So immediately, like we mentioned, we have close to 160 basic frequencies that we were running, went to the Middle East as well as into Europe. So once the prices happen, [indiscernible] of this had [indiscernible] for obvious reasons because as it was a highest loan. So 160 flights got canceled for a couple of days. After that, slowly, we started to ramp up. We were in the 20s for a large part of March that we were operating. As things stand today, there is a high degree of normalcy that has started to come in into the Middle East. We've started operations approximately 2/3 of that 160 million that we had are now operating, and we intend to kind of scale it back to full capacity by the end of June, which infinitely then grows into a peak period, which is for [indiscernible] in Q2. So that's the way things have shaped up. February, we had to cancel slowly, we'll start to ramp up, we are back to 2/3 and then we intend to take full kind of capacity by the end of June. And this is also something to risk assessment is all subject to the risk assessment that we do both internally as well as with various partners that we have.

The next question is from the line of Karan Khanna from AMBIT Capital.

Firstly, [indiscernible] set to take over as CEO in August could you comment on key strategic priorities that are being handed over? And given Mr. Volt's extensive experience with full-service global carriers, should we anticipate any further shift in Indigo's hybrid model?

Well, I could. This is Rahul. I already talked about what strategic responsibility we're going to hand over to, and we are going to hand over the business to it. He is going to be the CEO, and he'll run the shop [indiscernible]

In terms of -- given his experience as running several shops with full-service global carriers, is that -- is there going to be a change in business strategy or will it still be more hybrid focused?

So let me answer that in 2 parts. What is very clear for Indigo is the fact that our single-aisle program with the 320 to the 20 months, is going to be always central to the future of this company. That's the very heart of this business. Now we are adding some mutation to it with the XLRs with possibly the 350s into the future. and that will be a hybrid model, and it's something that Billy is well experienced with. I mean either that [indiscernible]. So we continue to build that strategy starting to create an international footprint, while we completely medically protect our short-haul business with our [ 3 2021 ] fleet.

Recently seen Air India take a much more aggressive stance on cutting capacity lasting nearly 22% of the domestic flights and cutting deep into the international network to call at high ATF prices given that Indigo domestic curtailment is far milder and you're still inducting 1 claim per week. What is your stance on Air India's capacity cuts? Are you looking at this as a tactical opportunity to aggressively capture their displace passenger base?

Well, we are not at liberty to answer questions on behalf of Air India. All I can say is that in the go we will do what is that for us. We will continue to watch the space and our capacity and continue to optimize our operations on a daily basis.

Ladies and gentlemen, that will be the last question for today. On behalf of IndiGo, that concludes today's conference. Thank you all for joining us, and you may now disconnect your lines. Thank you.