Shares of InterGlobe Aviation, the parent firm of private carrier IndiGo, were falling at open on Monday after analysts pointed out that the airline’s first-quarter earnings beat was not as rosy as it appeared to be on the surface.

What Happened: India’s top airline said its net profit for the quarter ended June 30 came in at ₹2,728.8 crore, compared with the ₹3,090.6 crore it earned in the same quarter a year ago. The figure beat analyst estimates of ₹2,282.5 crore.

Meanwhile, the firm’s revenue from operations jumped 21.37% to ₹20,248.9 crore in the quarter, compared with the ₹16,683 crore it made a year ago. This was ahead of street expectations of ₹18,328 crore.

The earnings beat came despite its grounded fleet holding steady at around 70 aircraft and a hit to its load factor due to the Delhi airport terminal collapse in June.

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Analyst Unpacks: However, analysts at Goldman Sachs said the profit numbers look healthier thanks to the one-off engine compensations that India’s top airline received from Pratt & Whitney for issues that have affected IndiGo since January. The brokerage did note that the company expects groundings to start going down by the end of FY25.

Goldman Sachs said the company’s yield, which grew 1.3% to ₹5.24, and available seat kilometres, which went up 11% to 36.3 billion, were largely in line with its estimates.

Under The Hood: The airline also said that it expects capacity in terms of available seat kilometres (ASKs) to increase by “high single digits” year on year, which industry analysts highlighted was a moderation from the airline’s previous guidance of low double-digit growth.

Moreover, the company’s EBITDA margins came under pressure due to higher fuel costs as some states have increased value-added tax on aviation turbine fuel, airport charges are expected to increase and inflation continues to trend upwards.

Analysts say that the management commentary suggests that at a unit level, revenue per available seat kilometres (RASKs) could fall up to 15%-25% sequentially.

Issues with engines made by Pratt & Whitney have affected IndiGo since January, grounding a large part of its fleet. Delays in the delivery of parts from original equipment manufacturers have stunted the carrier’s performance in the near term, though most analysts predict growth towards the end of the year, helped along by likely price hikes.

However, brokerages expect the ongoing issues to weigh on IndiGo’s profit numbers for FY25.

Price Action: IndiGo’s share price was down 1.48% at ₹4,428 near the start of trade on Friday.

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