BENGALURU, July 26 (Reuters) - IndiGo said it

expects the number of aircraft grounded due to Pratt & Whitney

engine issues to decrease by early next year, with the Indian

airline also reporting its first quarterly profit fall in nearly

two years.

A rare powder metal defect in Pratt & Whitney

engines that was disclosed last year has grounded hundreds of

twin-engined Airbus A320neo aircraft worldwide.

This, along with earlier Pratt engine issues, grounded about

a fifth of IndiGo's fleet, the airline disclosed in November.

"Aircraft on ground remains at mid-70s," IndiGo's Chief

Financial Officer Gaurav Negi said on a post-earnings call on

Friday, adding that the airline would continue to lease more

jets to meet demand.

IndiGo, one of the largest customers for the A320 family of

planes, has been grappling with higher leasing costs since last

year due to the groundings.

The company, India's biggest airline by market share, has

relied on aircraft lease extensions to meet booming travel

demand in one of the world's fastest growing aviation markets.

Earlier in the day, the airline's operator reported an 11%

fall in first-quarter profit as it grappled with higher

operating costs and largely unchanged fares.

IndiGo's leasing costs tripled, while maintenance costs grew

7%. Its total expenses in the quarter rose about 24%, led by a

23% rise in fuel costs.

The low-cost carrier said in June it would receive

compensation from Pratt & Whitney for the aircraft groundings,

but is yet to disclose the amount.

IndiGo reported record quarterly revenue of $2.3 billion,

and forecast high single-digit percentage capacity growth for

the second quarter.

($1 = 83.6960 Indian rupees)