Indigo to reap maximum benefit as Jet Airways, SpiceJet woes mount

By: |
Updated: March 29, 2019 7:14:03 AM

According to analysts, domestic aggregate passenger growth has been lower than the capacity growth in 9 out of the first 11 months of FY19.

Jet Airways, SpiceJet, Boeing 737 Max fleet, ICICI Securities, Kotak Institutional EquitiesAnalysts believe that IndiGo, which reported a market share of 43.4% last month, is better placed among competitors despite having its own share of problems.

IndiGo, the largest domestic carrier, is poised to reap the maximum benefit in terms of market share and better yields, as domestic airlines’ capacity has contracted sharply due to grounding of aircraft by Jet Airways and Boeing 737 Max fleet of SpiceJet, analysts maintain. Domestic traffic growth at 5.6% year-on-year was at 53-month low during February as aircraft groundings and repair work at second-busiest Mumbai airport kept airfares high.

Fares on key metro city routes have been up by around 25% y-o-y due to curtailed capacity of the carriers in March. Due to rise in airfares following cost escalations in H1FY19, the domestic passenger growth has significantly lagged behind the capacity expansion by airlines so far this fiscal.

Also read| GoAir offer: Now, grab flight tickets for as low as Rs 1,415; check details

According to analysts, domestic aggregate passenger growth has been lower than the capacity growth in 9 out of the first 11 months of FY19. “It (the imbalance) intensified over the past 2-3 months as prices remained firm in the face of ex-IndiGo capacity contraction due to grounding of Jet and MAX fleet,” analysts at ICICI Securities noted. While IndiGo has reduced its flying schedule by more than 30 flights per day, its low-cost rival SpiceJet was forced to ground 12 Boeing 737 Max aircraft over safety concerns this month. Cash-strapped Jet Airways is flying just 35 aircraft from fleet of 119 planes due to groundings by lessors for non-payment of rentals.

Analysts believe that IndiGo, which reported a market share of 43.4% last month, is better placed among competitors despite having its own share of problems. The Gurugram-based carrier has been adding capacity at 30% y-o-y in FY19 thus far.

“Such competitive tailwinds, which we expect to continue at least till Q1FY20-end, will benefit IndiGo the most and its domestic capacity market share can go beyond 45%,” the analysts said. While the crisis resolution plan for Jet Airways and resumption of Max operations at SpiceJet could take more time, the present market conditions offer strong opportunity for IndiGo to gain further market share.

Analysts also pointed out that current market disruption could also boost yields as airlines command higher fares. “Recent events of capacity disruption of competitors can drive up IndiGo’s FY2020 capacity addition as well as yields,” analysts at Kotak Institutional Equities said.

Get live Stock Prices from BSE and NSE and latest NAV, portfolio of Mutual Funds, calculate your tax by Income Tax Calculator, know market’s Top Gainers, Top Losers & Best Equity Funds. Like us on Facebook and follow us on Twitter.

Financial Express is now on Telegram. Click here to join our channel and stay updated with the latest Biz news and updates.

Next Stories
1ICRA expects muted participation in spectrum auction, sees industry debt rising
2ED attaches JP Morgan assets worth Rs 187 cr, MNC in SC denies wrong doing in Amrapali case
3‘Atma Nirbhar’ MSMEs: How govt measures will enable them for long-term sustainability, profitability