Interglobe Aviation Ltd Management Discussions.

In FY 2021, your Company was ranked the safest airline in India by the Safe Travel Barometer. This recognition is testimony to IndiGos commitment towards safety, and it further encourages us to strive for better services for the customers as they travel onboard IndiGos lean, clean flying machines.

Industry Overview

As per Indian Brand Equity Foundation (IBEF), the Indian aviation market is expected to become the worlds third largest market in terms of passengers by 2024. The industrys growth is being propelled by development of airports across multiple city tiers; a liberalised FDI policy; increasing adoption of information technology and a strong focus on regional connectivity. In the past decade, a number of low-cost carriers (LCCs) have entered the Indian air travel market and stimulated traffic through their low-cost business models. By using price stimulation as a core business strategy, LCCs have been able to cater to the vast appetite for air travel by Indias middle-class segment. Going forward, LCCs should be better placed in a post Covid-19 era and in times of heightened price sensitivity, as their lower cost base should give them an edge.

The Covid-19 crisis in India:

The first Covid-19 case was reported in India in January 2020 and thereafter the first Covid-19 wave built up relatively slowly over a period of six months, peaking in September 2020 at about 96,000 cases per day. Starting from this peak the number of cases gradually declined and hit a low point of about less than 10,000 cases per day in the month of February 2021. Unfortunately, post February a second Covid-19 wave become apparent and this time the number of cases increased sharply day by day until it peaked at 414,280 cases per day on May 6, 2021. Since then, the second wave has shown a decline and the decline appears to be just as sharp in nature as the rise. In the 30 days from May 6 till June 5, 2021, the number of cases per day declined from the peak of 414,280 to 114,488. The future trajectory of the Covid-19 cases is of course uncertain. There is speculation that a third Covid-19 wave may hit India by the end of this calendar year. The central government, state agencies and the private sector are all racing out with vaccination drives to ensure that sufficient number of people are vaccinated before the third wave arrives, such that the impact of the third wave is relatively muted. With the vaccination drive gaining momentum, about 230 million doses have already been administered. Further, with the increased focus on vaccination by all states, we believe it is likely that about 6-7 million Indians will get vaccinated daily, resulting in over 200 million people getting vaccinated on a monthly basis.

Impact of Covid-19 on the Indian economy

Prior to the Covid-19 pandemic, India had become the worlds fifth largest economy as per the IMF. When ranked by nominal GDP, the country had leapfrogged both France and the UK.

The pandemic and subsequent lockdowns had a severe impact on the Indian economy. Output fell by 9.6%as per World Bank estimates in FY 2021, reflecting a sharp drop in household spending and private investment. Gradual easing of restrictions, pent-up demand, festive demand, and the revival of several infrastructure projects by the Government, resulted in a relatively strong, albeit short lived, bounce back in travel demand in the period December 2020 to February 2021.

With the gradual abatement of the first Covid-19 wave, India was witnessing a sharp ‘v shaped recovery in domestic traffic in the period through February 2021.

According to IMF, Indias GDP is estimated to have contracted by negative 8% during FY 2021, amongst the steepest in the world. However, it also projects that the countrys GDP should bounce back by 12.5% during FY 2022, while tapering back to a more temperate 6.9% for FY 2023.

Further, as per the rating agency Crisil Indias GDP growth in FY 2021 will be dependent on the ongoing second wave of Covid-19 and it is estimated to be in the range of 8.2 to 11% under the various scenarios.

Impact on domestic Indian aviation

As with the world aviation industry, the Covid-19 pandemic has had a massive impact on the Indian aviation industry. According to DGCA, passengers carried by domestic airlines fell by 56% for CY 2020 compared to the previous year.

With the gradual abatement of the first Covid-19 wave, India was witnessing a sharp ‘v shaped recovery in domestic traffic in the period through February 2021. Further, based on these demand trends the Government also gradually increased the limit of capacity deployment in the domestic markets to 80%.

Impact of the second wave:

Since March 2021, the second wave of Covid-19 coupled with statewide lockdowns and added travel restrictions has pushed forward the demand recovery. As a result, the average domestic passengers per day reduced from around 280,000 in February 2021 to around 191,000 in April 2021 and further came down in May 2021. As per CAPA, most of the Indian airlines were already vulnerable prior to the Covid-19 with weak balance sheets and poor liquidity. Covid-19 has inflicted massive losses and an increasing debt burden on carriers that were structurally ill-equipped to absorb this impact. It further added that the extent of the challenge is reflected in the fact that Indian carriers under-recovered almost USD 70 per passenger in FY 2021.

Impact on international operations:

Prior to the advent of Covid-19, IndiGos international operations had grown to 156 international departures per day with 24 destinations in 17 countries and IndiGo had firm plans to add flights to more international points in FY 2021. Following the discontinuation of scheduled international passenger services post the lockdown in India, IndiGo supported the movement of Indian as well as foreign citizens to and from their homelands through operation of Vande Bharat flights, charters and operations under the air bubbles established by the Government. IndiGo has also operated a large number of cargo charters, converting a number of passenger aircraft to also carry cargo in cabin. IndiGo operated more than 13,000 international flights – Vande Bharat, passenger & cargo charters and air bubble flights, in FY 2021. Given the restrictions on operation of scheduled international passenger services, IndiGos international operations in FY 2021 were only around 17% of its pre-Covid operations. International operations as of date are severely restricted due to the second wave and it is not possible to predict, with any certainty, when scheduled international operations will resume. We however remain confident that demand for international air travel will rebound as vaccination progresses across the globe and governments collectively establish processes to enable seamless travel of vaccinated persons.

IndiGos response to the pandemic:

In response to the severe impact on revenues, IndiGo took the following actions:

• Its primary focus was on the cash position. Your Companys fixed cash burn was around Rs. 400 million per day in March 2020. Cash burn was gradually reduced to Rs. 150 million per day in the December 2020 quarter due to the various cost reduction initiatives and cash contribution from operations. Unfortunately, with the demand erosion due to the second wave of Covid-19, average daily cash burn increased to Rs. 190 million in the March 2021 quarter. Your Company has also taken cash enhancement measures such as acquiring NEOs financed through operating lease, refinancing the unencumbered aircraft and engines, and securing credit lines with several banks. As a result of these measures, IndiGos free cash balance stood at Rs. 71.0 billion as on March 31, 2021.

• Your Company has looked for opportunities for generating revenues through newer streams such as repatriation flights, charter flights and cargo in cabin. The contribution from these flights has helped in managing the cash position.

• Your Company has increased the efficiency of its fleet in terms of fuel consumption by replacing CEOs with the more modern NEOs. NEO aircraft are 15% more fuel efficient than CEO aircraft.

• With the reduction in departures, IndiGo unfortunately had no option but to implement pay cuts and layoffs. As a result, its employee costs during the year reduced by 30% as compared to the previous year.

• Even with lower capacity, IndiGo continued to increase its penetration into the smaller cities and towns of India. During this Covid-19 period we announced 7 new domestic stations.

• Your Company reviewed all the customer processes to enhance digitisation and minimise touch points. This has not only made the customers feel safer but has significantly improved IndiGos customer service as well.

Although this crisis has caused economic slowdown in India, many experts suggest that this could be an opportunity for the country to finally push through and implement changes that one would have liked to have seen earlier. Indias fast-growing telecom, infrastructure, digital and defense space, in particular, could see a faster rebound. According to The Centre for Economic and Business Research (CEBR), the effects of a deep pandemic-related recession and a steep fall in the rupee relegated India by one position, to become the sixth largest economy in the world, India will not overtake the UK again until 2024, the CEBR said. It projects that once India regains momentum, it will overtake Germany to be the worlds fourth-largest economy, behind the US, China and Japan, by CY 2027.

The civil aviation industry in India has emerged as one of Indias fastest-growing sectors over the past few years. India has now become the third-largest domestic aviation market in the world. Growth in air-passenger traffic in India has been particularly strong since the new millennium, especially with rising incomes, added connectivity and affordable fares. However, given the severe disruption caused by the pandemic, the airline sector may witness a prolonged road to recovery, given the increased risk aversion among air travelers, the likelihood of extended travel restrictions across countries and corporate travel cuts. Growth in passenger traffic has been strong since the new millennium, especially with rising income and low-cost aviation. As per DGCA, Indian carriers carried 164 million passengers in FY 2020, having grown at a CAGR of 12.2% during FY 2016 to FY 2020.

The Government has envisioned that an additional 100 airports should be made operational within the next five years.

To cater to the rising air traffic, the Government of India has been working towards increasing the number of airports. As per the Airports Authority of India (AAI)s Annual Report of FY 2020, AAI is planning to invest Rs. 20,000 Crores in the coming five years for development and upgradation of existing AAI airports across the country. The Government has envisioned that an additional 100 airports should be made operational within the next five years. AAI has signed an MoU with the Ministry of Civil Aviation for the year FY 2020, whereby AAI had undertaken an ambitious target of Rs. 3880 Crores towards capital expenditure on airport infrastructure development, of which more than 90% of the target was spent during the year. In addition, the Government is planning to invest USD 1.83 billion for development of airport infrastructure along with aviation navigation services by 2026. As of March 2021, India had 137 operational airports. Government has envisaged increasing the number of operational airports to 190-200 by FY 2024. Introduction of new terminals in Mumbai, Bangalore, Chennai and Kolkata will also add to the infrastructure capacity. Further, The GOI has allowed 100% FDI under automatic route for greenfield and brownfield airport projects. The Government has also allowed 100% FDI under automatic route in scheduled air transport service, regional air transport service and domestic scheduled passenger airline. FDI inflow into Indias air transport sector (including air freight) reached USD 2.79 billion between April 2000 and June 2020. As per IBEF, Indias aviation industry is expected to witness USD 4.99 billion investment in the next four years. The Indian Government is planning to invest USD 1.83 billion for development of airport infrastructure along with aviation navigation services by 2026.

According to World Travel & Tourism Council, India ranked 10th among 185 countries in terms of travel & tourisms total contribution to the GDP. As per IBEF, leisure travel spending is expected to reach USD 432.3 billion by 2028, whereas business travel revenue is projected to increase to USD 24.4 billion by 2028.

According to IBEF, the freight traffic in India grew at a CAGR of 5.32% during FY 2016 to FY 2020 from 2.70 million tonnes (MT) to 3.33 MT. Going forward, given Indias economic growth, freight traffic within India has the potential to grow to 17 MT by FY 2040. The growth in import and export in India will be the key driver for growth in freight traffic, as 30% of total trade is undertaken via airways. In January 2019, the Government of India released the National Air Cargo Policy Outline 2019, which envisaged making Indian air cargo and logistics most efficient, seamless and cost and time effective globally by the end of next decade.

Company Overview

IndiGo ("your Company") is Indias largest passenger airline operating as a low-cost carrier. As on March 31, 2021 serving 65 domestic destinations. Your Company provides passengers with a simple, unbundled product, fulfilling its singular brand promise of providing air connectivity and affordable fares across India and to international destinations, thereby promoting trade, tourism and mobility. Its mission is to build the best transportation system in the world. In addition to passenger transportation, its activities primarily include cargo and mail services on scheduled flights. IndiGo commenced operations in August 2006 with a single aircraft and has grown its fleet to 285 aircraft as of March 31, 2021. Your Company had placed an order of 430 A320 NEO family aircraft in 2011 and 2015. In addition to this, in October 2019, your Company placed an additional firm order for 300 A320 NEO family aircraft, which includes A321 XLRs in addition to A320 NEOs and A321 NEOs. At March 31, 2021, your Company had 159 A320 NEO family aircraft. Of this 120 are A320 NEO aircraft which are about 15% more fuel efficient as compared to the A320 CEOs without sharklets and 39 aircraft are A321 NEOs which have lower unit costs compared to A320 NEOs because of higher seating capacity and longer range. Your Company had also placed an order with Avions de Transport Regional GIE, or ATR, in August 2017, for the purchase of up to 50 ATR72-600 turboprop aircraft. These aircraft have given us the opportunity to redefine air travel to smaller cities that either did not have reliable air services so far or were subject to exorbitant airfares. As of March 31, 2021, IndiGo had 26 ATR aircraft in its fleet.

Building on the success of the CarGo business in recent years, your Company has initiated a freighter program and is in the process of sourcing 4 A321CEO aircraft each of which will be converted from passenger jets to a full freighter configuration. A Letter of Intent has been signed with a lessor for two aircraft. In FY 2021, your Company was ranked the safest airline in India by the Safe Travel Barometer. IndiGo has taken all precautionary measures as mandated by the government and has also gone beyond, to ensure the safety of its passengers onboard. This recognition is the evidence of IndiGos commitment towards safety, and it further encourages us to strive for better services for the customers as they travel onboard the lean, clean flying machines. In FY 2021, your Company was ranked 33rd amongst Indias top 100 brands by Campaign India, a phenomenal improvement of 52 positions as compared to the previous year. These awards are a testimony to IndiGos best-in-class service quality.

IndiGos passionate cost-conscious approach to business means that every penny saved ultimately gives it greater ability to charge lower fares, and thus, stimulate higher demand, and save travelers money.

IndiGos core values and principles

IndiGo is guided by a set of core values and key guiding principles: Being On-time; Providing Low Fares; and Being Courteous and Hassle-Free. These principles are the bedrock of your Companys vision, and IndiGos ardent adherence to them has created a distinct ‘IndiGo experience that has set us apart in the industry.

Being On-Time

Before IndiGo, airlines were mired in tardy and unpredictable schedules, causing great inconvenience to travelers. Your Company took this as a priority challenge and made being on-time a key service value. Your Company has emerged as the leading domestic airline in terms of "on-time performance" (OTP) and has been ranked No. 1, with an average OTP of 95.4%1 in FY 2021.

Lower Fares

Your Companys low-cost operating structure enables it to charge lower fares over other airlines. IndiGos passionate cost-conscious approach to business means that every penny saved ultimately gives it greater ability to charge lower fares, and thus, stimulate higher demand, and save travelers money.

Hassle-Free and Courteous Service

Offering a smooth and pleasant experience is a significant pillar of your Companys three guiding principles. Your Company has been instrumental in transforming the air travel experience in the domestic market – right from the experience of ticket booking to arrival at a destination. Your Company is uncompromising in treating its customers with respect, honesty, and gratitude. IndiGo has invested in cutting-edge technologies to make it easier for customers to book on their mobile platforms.

Operational Highlights

For the year ended March 31
2021 2020 Change
ASK (in millions) 45,425 96,260 -52.8%
RPK (in millions) 31,519 82,557 -61.8%
Passenger Load Factor (%) 69.4% 85.8% -16.4 pts
Number of Passengers Carried (in thousands) 30,694 75,026 -59.1%
Block Hours 479,739 1,022,515 -53.1%
Number of Scheduled Destinations served as of the period end 65 86 -24.4%
Total Number of Flights 260,311 522,853 -50.2%
Number of Aircraft at period end 285 262 8.8%
Financial Highlights
For the year ended March 31
2021 2020 Change
EBITDAR Margin 4.3% 14.2% -10.0 pts
Net Profit Margin -39.7% -0.7% -39.0 pts
RASK (Rs.) 3.30 3.77 -12.4%
CASK (Rs.) 4.58 3.80 20.7%
CASK Ex-Fuel (Rs.) 3.74 2.50 49.4%

Financial Performance


Passenger ticket revenue:

Passenger ticket revenue reduced by 62.4% from Rs. 314,470.59 million in FY 2020 to Rs. 118,369.80 million in FY 2021.

Revenue from ancillary products and services:

Revenue from ancillary products and services primarily include cargo, special service requests, ticket modification and cancellation, in-flight sales and tours. Revenue from ancillary products and services reduced by 39.8% from Rs. 39,458.47 million in FY 2020 to Rs. 23,738.29 million in FY 2021.

Other Income:

Other Income is primarily comprised of financial income on cash and other non-operating income. Other Income decreased by 32.5% from Rs. 15,355.09 million in FY 2020 to Rs. 10,369.64 million in FY 2021.

Revenue per Available Seat Kilometre (RASK):

RASK decreased by 12.4% from Rs. 3.77 in FY 2020 to Rs. 3.30 in FY 2021, driven by decrease in passenger load factors and yields.


Total expenses decreased by 42.8% from Rs. 375,471.79 million in FY 2020 to Rs. 214,956.65 million in FY 2021.

Aircraft fuel expenses:

Aircraft fuel expenses decreased by 69.2% from Rs.124,537.94 million in FY 2020 to Rs. 38,312.77 million in FY 2021, against 52.8% decrease in capacity, on a year over year basis, and offset by reduction in IOCL ATF prices and increase in the number of fuel-efficient NEO aircraft.

Aircraft ownership cost:

Aircraft ownership cost comprises of aircraft and engine rentals, supplementary rental and aircraft maintenance cost, depreciation and amortisation, and net interest expense. Aircraft ownership cost decreased by 5.1% from Rs. 112,052.99 million in FY 2020 to Rs. 106,319.95 in FY 2021.

Employee benefits expense:

Employee benefits expense decreased by 30.0% from Rs. 47,099.59 million in FY 2020 to Rs. 32,954.92 million in FY 2021.

Foreign exchange (gain)/ loss: Foreign exchange losses decreased from Rs. 15,461.89 million in FY 2020 to Rs. (5,230.26) million in FY 2021.

Other expenses:

Other expenses decreased by 45.9% from Rs. 35,340.04 million in FY 2020 to Rs. 19,104.10 million in FY 2021.

Cost per Available Seat Kilometre (CASK): CASK increased by 20.7% from Rs. 3.80 in FY 2020 to Rs. 4.58 in FY 2021, primarily driven by foreign exchange gain and cost reductions. The Company reported a net loss of Rs. 58,064.27 million in FY 2021 against a net loss of Rs. 2,336.78 million in FY 2020. This resulted in decrease in the Return on Equity from -4.0% in FY 2020 to -5,237.7% in FY 2021.

FY 2021 was utilised as an opportunity to strengthen the airline in key areas such as cost reduction and liquidity enhancement, customer preference, network optimisation and experimenting with new revenue models.

Balance Sheet

IndiGos total cash decreased by 8.9% to Rs. 185,684.65 million as of March 31, 2021, comprising of free cash of Rs. 70,997.06 million and restricted cash of Rs. 114,687.59 million. Total debt for the Company was Rs. 298,597 million, including capitalised operating lease liability of Rs. 257,387 million, as of March 31, 2021.

Company Outlook and response to Covid-19

Covid-19 has led to major disruptions across world economies and has led to the implementation of several government-imposed restrictions, particularly in the travel sector. In India too, the Government took early actions that led to cessation of all scheduled passenger flights for a period of 61 days starting March 25, following which the domestic market was opened with Government restrictions on capacity. With the second wave of Covid-19 in India there are lockdowns, curfews and state-wide travel restrictions in place which has again led to the dip in demand.

During FY 2021, your Company has taken several actions to mitigate the impact and risks associated with Covid-19. This period was utilised as an opportunity to strengthen the airline in key areas such as cost reduction and liquidity enhancement, customer preference, network optimisation and experimenting with new revenue models.

Minimise net cash burn:

To reduce the cash burn, IndiGo undertook several measures including

1) making the fleet more efficient by substituting older CEOs with NEOs and prioritising flying with NEOs over the older CEO aircraft given that CEOs have higher operating cost, driven by higher maintenance cost and higher fuel burn

2) negotiating better prices and terms with its partners,

3) introducing staggering pay cuts, and leave without pay,

4) revenue maximisation through network optimisation and

5) adding efficiencies across work streams. During these trying times, your Company managed all its costs from a long-term perspective and continued to strengthen the relationship with its lessors and vendors. Further, these consistent efforts of cost reduction helped IndiGo to reduce its net cash burn by almost 50 % in a short span of 6 months, i.e., from Rs. 300 million per day in June 2020 to Rs. 150 million per day the December 2020 quarter. However, owing to the second wave of Covid-19 the average net cash burn increased to Rs. 190 million in March 2021 quarter.

• Bolstering liquidity:

To improve its cash position, IndiGo undertook several liquidity measures

• Acquiring NEOs financed through operating lease

• Securing favorable credit terms from suppliers

• Sale and lease back of unencumbered assets

• Obtaining moratorium towards principal repayment for aircraft on finance leases.

• Working capital loans from banks

These measures helped IndiGo to retain a strong balance sheet and a healthy cash balance. As of March 31, 2021, your Company ended with a total cash balance of Rs. 185,685 billion, of which Rs. 70,997 billion was free cash. To augment the liquidity further, IndiGo also secured Board approval for raising of funds aggregating Rs. 30 billion by issue of equity shares through qualified institutional placement along-with exploring other options to increase liquidity.

• Adding connectivity in Tier2 and Tier 3 cities

Your Company was constrained from growing internationally and turned its full attention on to the domestic network and is strengthening it further by opening new stations and increasing its penetration into smaller cities. IndiGo is remaining true to its mission of being a catalyst of economic growth of in the country and is therefore deliberately and actively enhancing connectivity in areas which need it the most, such as in the North East, in Ladakh and in Kashmir.

• Enhancing CarGo business and new revenue models

IndiGos CarGo line of business performed well especially during the lockdown. Your Company took several innovative measures and utilised its cargo capacity to carry essentials and medical supplies including vaccines both across domestic and international destinations. Through this experience, your Company learned valuable lessons about the demand and scope for cargo during this lockdown, giving strong insights for augmenting its cargo operations in the years ahead. For this purpose, your Company has entered a freighter program under which it will source 4 freighters and is expected to take the delivery of its first freighter in the first half of CY 2022. During FY 2021, your Company also introduced charter services and operate under Vande Bharat to maximise revenue opportunities. These charter services also helped in national missions involving repatriation of thousands of passengers.

Health and safety of passengers and employees is of paramount importance to IndiGo.

• Ensuring health and safety of passengers and employees:

Health and safety of passengers and employees is of paramount importance to IndiGo and for this purpose IndiGo has introduced several operating measures including contactless boarding, strict enforcement of social distancing norms, regular sanitisation of aircraft and provision of PPE kit, masks, face shields etc. To ensure IndiGos employees are well protected, all employees are being vaccinated and additional support is being provided to tide through the crisis.

• Improving the customer experience

IndiGo remains committed to deliver a hassle-free experience, especially during tough times. Exemplary customer service is the core of your Companys values. Due to enhanced focus on customer service, IndiGos NPS scores are higher than the pre-pandemic levels. As was promised, IndiGo on priority refunded around Rs. 1,030 crores owed to its customers for the flights cancelled during the lockdown.

Further, an online survey conducted by your Company during December 2020 revealed that 81% of the travelers are confident that IndiGo will ensure clean and safe travel, this is a 16-point improvement as compared to the same survey conducted in June 2020. The second wave of Covid-19 has once again made the environment extremely challenging. However, your Company will continue to closely monitor the situation and will take all the necessary actions to minimise its impact. The interplay of external factors makes it difficult to envisage timelines to attain 100% pre-Covid capacity. However, we are confident that we will emerge from the crisis much stronger and more nimble than when we entered.

Opportunity, Threats, Risks, and Concerns

The Indian aviation industry is expected to continue to grow at a robust pace in the long term. Increasing middle-class population, a favourable demography, along with the anticipated continuation of economic development and growth in household incomes support the positive long-term outlook. The air travel infrastructure of India has significantly grown over the last decade and your Company takes pride in taking a leading role in building this critical infrastructure in India. IndiGo believes there is still a significant growth opportunity in the air travel market in India, and it is well prepared to capitalise on this opportunity.

At IndiGo, we believe our structural cost advantage gives us the ability to withstand various challenges, even the current pandemic. However, our growth also depends upon certain external factors.

Set forth below are some of the risks that may potentially have an adverse impact on our business, financial results and our performance outlook.

• Pandemic Risk:

An outbreak of a communicable disease on an international level causes air travel to inevitably becomes the focus of much attention due to the potential for air travel to increase infection rates. In fact, Covid-19 cases amongst IndiGos own staff or its customers may result in disrupted operations, which would therefore result in a potential damage to our reputation and decreased demand for travel. The adverse impacts of the ongoing Covid-19 global pandemic, and possible outbreaks of another disease or similar public health threat in the future can significantly affect our operations and result in financial losses.

• Operational issues with aircraft and engines:

In the past, we had experienced operational issues with certain A320 NEO engines, which had impacted our operations. These operational challenges had required the engine supplier to deliver upgraded engines and provide spare engines in the interim to reduce operational disruptions. Reliance on single suppliers to source the aircraft and certain parts and failure to obtain timely deliveries, additional equipment or support can impact our financials materially. Further, any incident or accident could result in damage to aircraft, personal injury and/or loss of life and increase in other incidental costs.

• Exceptional variation in fuel prices:

Aircraft fuel expenses are the most significant expense of our total cost. The price of fuel cannot be accurately predicted because of numerous economic and political factors and events that govern them. Our operating results could be negatively impacted by any adverse movement in fuel prices.

• Adverse movement in foreign exchange as a large proportion of our expenses are exposed to foreign exchange rate risk:

Our costs including aircraft and engine lease rentals, aircraft and engine maintenance and aircraft insurance are denominated in foreign currency. Adverse movement in foreign exchange may negatively impact our profitability.

• Airport Infrastructure constraints and increased airport costs in India:

As we expand our fleet, our growth is dependent on adequate airport infrastructure in India to support our operations. Non-availability of terminal space, slots and aircraft parking and any increase in the cost of airport landing and departures may adversely affect our operations. While the Governments initiatives towards the construction of newer runways or terminals may ease some of these constraints, availability of adequate airport infrastructure will likely continue to be a challenge.

Your Company invests abundantly in training all its employees, who are instrumental in making the acclaimed "IndiGo Experience" what it is today.

• Competition in the airline industry:

The airline industry is highly competitive. We face competition from other low-cost carriers as well as full-service carriers that operate on our routes. We may also face competition from airline, alliances and new entrant airlines that could be established in the future.

• Changes in the Government regulations:

The civil aviation industry in India is regulated by the Ministry of Civil Aviation ("MoCA"), the DGCA and the Airports Authority of India ("AAI"). The regulations are extensive, complex and cover all major aspects of operations, including basic licenses, aircraft acquisitions and routing. Any changes in regulations, or the imposition of additional restrictions and conditions, can affect our business and operations.

• Inability to recruit and retain key talent:

Our business requires us to attract and retain highly skilled, dedicated and efficient management personnel and other critical employees. Any shortfall in the availability or our inability to hire, train or retain qualified employees may have an adverse impact on our operations and our ability to grow.

• Breaches in IT/ Cybersecurity:

Airlines are heavily dependent on IT and complex network technology. These complex systems and technologies are subject to interruptions and delays caused by catastrophic events, acts of war or terrorism, power loss, computer and telecommunications failures, security breaches and similar events or disruptions. Any such system interruptions or security breaches may disrupt our normal business operations, potentially leading to loss of business, subject us to data breach and can result in multi-pronged impact including regulatory actions, operational interruption, reputation loss, intellectual property loss etc.

• Reputation Risk:

We are exposed to reputation damage if any of our aircraft is subject to an emergency, accident, terrorist incident or any other disaster. Further, any adverse experience or harm arising to our customers or vendors, while dealing with your Company, can also potentially lead to damage to our reputation.

• Environmental, social and governance risk:

As the environmental impact of air travel comes under increased government and regulatory pressure, there are risks of higher costs levied on the industry to offset its carbon footprint. Beyond carbon emission, other sustainability efforts such as noise mitigation and waste management have been gaining increased focus from various stakeholders. As more institutional investors are considering ESG as a factor when making investment decisions, this could result in lower investment in the aviation sector in general.

• Fraud and exploitation of operational disruption:

The control framework and monitoring of potential criminal activity may have become weakened due to reduced headcount and remote working, leaving gaps in fraud detection and creating opportunities for malicious activity by customers and staff. The pandemic has also presented short term liquidity challenges, leading to cost reduction initiatives which may impact the control environment and monitoring activities.

• Liquidity management and profitability concerns:

We are currently in the process of replacing our older classic engine aircraft with newer ones. Lack of access to SLB markets for financing new aircraft can impact our cash balance. Also, lower capacity deployment leads to higher fixed costs. Continued capacity deployment restrictions by the aviation authorities and state restrictions may reduce your Companys profitability.

• Employee related risks:

Labour actions and strikes can cause disruption to operations and profitability. This may also lead to negative impact on employee relations and morale.

Internal Control Systems and their Adequacy

Our internal control procedures are adequate to ensure compliance with various policies, practices, and statutes in keeping with the organisations pace of growth and increasing complexity of operations. We have in place systems and processes commensurate with our size and nature of business and we maintain a system of internal controls designed to provide reasonable assurance regarding the following:

• Effectiveness and efficiency of operations

• Adequacy of safeguards for assets

• Prevention and detection of frauds and errors

• Accuracy and completeness of the accounting records

• Timely preparation of reliable financial information

An independent internal audit is carried out to ensure the adequacy of the internal control system and adherence to policies and practices. The scope of the internal audit activity is guided by the annual audit plan, which is approved by the Audit Committee of the Board. The Audit Committee reviews reports submitted by the independent internal auditor and monitors follow up and corrective actions are taken.

Human Resources

As a purpose led organisation, your Company truly believes in the value of both people and performance. In order to achieve this, your Company invests in the learning and development of employees, seeks regular feedback and devises action plans on the basis of inputs. Your Company invests abundantly in training all its employees, who are instrumental in making the acclaimed ‘IndiGo Experience" what it is today. Your Company promotes diversity and inclusion in the workplace. To take this one step forward, your Company has now identified employees across all locations and departments, to become Diversity & Inclusion Champs. Through your Companys state of the art learning academy, ‘ifly, your Company has launched an e-learning module on Diversity and Inclusion for all people managers. Through continued initiatives like these, your Companys endeavor is to help everyone understand the qualities of inclusive leaders, mindsets, language, and behaviors that are inclusive and recognise biases that take place in critical processes like hiring and demonstrate the appropriate way to deal with people of different genders and different backgrounds. Your Companys commitment to a high-trust, high performance culture has been reinforced with your Company being certified as a "Great Place to WorkTM" by the Great Places to Work Institute. This further strengthens your Companys position as one of the best workplaces in India that offers a safe and inclusive work environment. In early 2020, your Company introduced "6e Speaks", a twice-a-month pulse survey mechanism to seek feedback from employees across all levels, including crew. The intent of "6e Speaks" is to get real-time inputs on how engaged its employees are. As several research studies have found, an engaged employee provides better customer service. Feedback thus received is reviewed at the highest leadership levels and specific actions undertaken to improve workplace experience of its employees. With the outbreak of Covid-19 virus, IndiGo has taken extra precaution at airports and other workplaces to ensure that all its employees are protected well against the virus. These measures include providing the front-line employees with PPE kits, conducting regular sanitisation drives across the offices and regular communication with employees to ensure their physical and mental well-being. These are challenging times, and unfortunately, given the volatile revenue environment in FY 2021, your Company had to take the painful decision of employee separation and introduce certain payroll cuts including leave without pay. Your Company is deeply aware that a highly engaged and motivated workforce leads to higher levels of customer service and is working on building a long-term employee culture. As of March 31, 2021, we have a dynamic set of 23,711 employees on your Companys roll including 3,734 pilots and 5,278 cabin crew.