IndiGo dips 5% as DGCA warns of action post 3 cases of in-flight shut-downs

InterGlobe Aviation-run IndiGo airlines slipped for the third consecutive day, down 5 per cent on the BSE on Tuesday, after industry regulator Directorate General of Civil Aviation (DGCA) instructed the airline to change engines on 16 of its Airbus A320neos, following three instances of in-flight engine shut-downs. The regulator has warned the airline the aircraft would have to be grounded if the changes are not completed in the next 15 days.

"We have decided that all aircraft with unmodified low-pressure turbine (LPT) engines, which have clocked more than 2,900 hours, have to be fitted with one modified LPT engine in the next 15 days... Failing which, all these aircraft shall be grounded. This has been done after studying the pattern and evaluating the risk,” said Director General of Civil Aviation Arun Kumar. READ REPORT HERE

The order was issued after the airline reported three incidents of in-flight engine shut-downs on the A320 (Neo) fitted with Pratt-Whitney (PW) engines on three consecutive days between October 24 and 26. 

ALSO READ: IndiGo dips 8% on biggest quarterly loss in Q2; brokerages cut target price

IndiGo has a fleet of 245, including 89 A320neos. These are powered by Pratt & Whitney (PW) engines and have been facing low-pressure turbine issues, main gearbox failure, and engine vibration, resulting in schedule disruptions. While modifications have been carried out, the regulator wants IndiGo to take more steps. In a statement on Monday, IndiGo said, “We are continuing to work with the authorities and will take necessary action, as required, going forward.” 

At 11:10 am, the stock was trading 2.8 per cent lower at Rs 1,413.8 per share. In comparison, the benchmark S&P BSE Sensex was ruling 393 points, or 1 per cent, higher at 39,643 level. So far, a total of 2.3 million shares have changed hand on the NSE and BSE. Since October 24, the stock has declined 17 per cent, as against a 1.5 per cent rise in the Sensex during the period. 

Last week, the airline reported its biggest quarterly loss of Rs 1,062 crore in the September quarter of financial year 2019-20 (Q2FY20). The airline, however, reported a higher total income at Rs 8,539.8 crore, up 31 per cent YoY. Its EBITDAR also rose 16 per cent to Rs 256.4 crore.

"In a historically weak quarter, we registered a negative profit before tax margin of 12. 7 per cent compared to 16 per cent margin loss registered in the same quarter last year. While our revenue performance was much better during the quarter, the losses were accentuated by forex losses on operating lease liabilities created under IND AS 116, and re-assessment of accrual estimates for future maintenance cost," Ronojoy Dutta, chief executive officer (CEO), IndiGo said in a statement.

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