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SpiceJet’s market share at 5 year high
After a turbulent April, domestic passenger (pax) traffic rebounded in May growing by 2.8% YoY to 12mn. With peak holiday season and incumbents led by SpiceJet & IndiGo accelerating their aircraft induction plans (in a bid to gain from Jet’s downfall), the industry reported a moderate capacity growth of 2.6% (up 8% MoM) while operating at PLFs of 90%. Aided by ~25 aircraft inductions over April-May, SpiceJet reported domestic Pax/ASK growth of 24%/32% YoY while its market share improved ~170bps MoM to a 5-year high of 14.8%. IndiGo inducted ~15 aircrafts over April-May which enabled domestic Pax/ASK growth of 23%/26% YoY while enjoying a market share of 49.2%.
Given the current environment of high yield, strong PLFs ensuing from Jet’s downfall & favorable ATF prices, we expect IndiGo & SpiceJet to sustain margin expansion and improved profitability. If the feud between Indigo promoters results in any adverse regulatory outcome, it can impact the growth rates and consequently valuations. Retain BUY on IndiGo & SpiceJet with a TP of Rs1.948/- and Rs211/- respectively.
* Domestic passenger traffic growth recovers after a turbulent April: After recording a de-growth in April-19, India’s domestic passenger (pax) traffic rebounded with 3% YoY growth to 12mn pax in May’19. IndiGo reported 23% growth in pax to 6mn. Aided by ~25 aircraft inductions over April-May, SpiceJet reported growth of 24% carrying 1.8mn pax. Continuing to gain from Jet’s loss Go Air/Vistara & AirAsia India reported a pax growth of 31%/23% & 19%.
* SpiceJet’s domestic market share at ~5 year high: SpiceJet’s market share improved ~170bps MoM to 14.8% (at 5-year high). IndiGo maintained its domestic leadership position with a market share of 49.2% (down 80bps MoM). Go Air/ Vistara/ AirAsia India reported a market share of 11%/ 5%/ 6%.
* Domestic capacity grew by 2.6%: After de-growing in Apr-19, domestic ASK reported moderate growth of 2.6% YoY (up ~8% MoM) as incumbents led by SpiceJet & IndiGo accelerated their aircraft induction plans in a bid to gain from Jet’s suspended operations. IndiGo, continuing with its aggressive capacity addition, reported 26% YoY increase in ASK. SpiceJet, benefitting from induction of ex-Jet aircrafts, reported 32% YoY growth in ASK. Go Air/ Vistara/ AirAsia India reported ASK growth of 24%/ 13%/ 34% respectively.
* Industry load factors at a 16-month high: The industry operated at a 16- month high domestic load factor of ~90% in May’19 (88% Apr19). With domestic Pax Load factor (PLFs) at 94%, SpiceJet reported 90%+ PLFs for the 49th consecutive month. IndiGo continued to report a strong PLFs of 91% (88% for Apr 19). Go Air/ Vistara/ AirAsia India clocked in PLFs of 93%/ 86%/ 89%.
* International operations continue to be most affected: International ASK reported a de-growth for the third straight month (down 23% YoY). However, IndiGo continued to expand its international footprint by carrying 0.5mn pax (up 45% YoY). IndiGo’s market share stood at 27%, making it the second largest Indian carrier after Air India.
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