Indian air passenger growth remains strong, with y-t-d FY16 domestic passenger/RPK growth at 24%/22% (33%/29% for Indigo). Given its firm fleet addition plans, we believe Indigo will benefit the most. Post initial delays, A320neo deliveries are on track and we estimate Indigo’s fleet at 131/153 by the end of FY17/FY18 versus 107 in March 2016. We expect Indigo’s ASK market share at 40% and load factors to remain above 80%. The stock trades at FY18 P/E of 11.9x and has an implied dividend yield of 3-4%. Maintain ‘buy’.
Indigo received three A320neo aircraft in March 2016 and expects its fleet to increase from 107 to 131 by end-FY17. Based on firm fleet announcements (164 new planes by FY18 to take India fleet size to 550), Indigo’s fleet expansion is the highest (36% share) in India. We expect A320neo share in its fleet at 30% by end-FY18 (fuel efficiency will give an edge in ticket pricing) and Indigo’s market share at 40% in FY17/FY18.
India passenger growth remains strong, with 23% passenger/RPK growth, and Indigo has demonstrated impressive fundamentals, with 40% RPK share and 33%/29% passenger/RPK growth. While the quarterly seasonality will continue (3Q is the strongest and 2Q is the weakest), we expect Indigo’s fleet addition to aptly support 20% passenger growth over the near-medium term.