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Published on 4/04/2019 11:34:12 AM | Source: ICICI Securities Ltd

Aviation Sector - Summer schedule show minimal growth in aggregate slot By ICICI Securities

Posted in Broking Firm Views - Sector Report| #Aviation Sector #Sector Report #ICICI Securities

 

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Summer schedule show minimal growth in aggregate slot

In this report, we compare airport slot distribution between summer schedules of 2018 and 2019. On expected lines, we note a sharp fall (76%) of slots being operated by Jet Airways (Jet). While slot growth remains on expected lines for other operators, the big fall in Jet slots is leading to only 3% overall growth in domestic slots in the current summer schedule. Jet has submitted its slot plan only till April, which means there will be a revision in the same. However, with the ensuing delay in Jet’s debt resolution, private airport operators in Delhi/Mumbai/ Bengaluru will increasingly have to reallocate some Jet slots to other airlines. IndiGo and SpiceJet (SJet) remain major beneficiaries.

 

* Sudden capacity shortfall remains the big near-term trigger for incumbents.

The total number of slots in summer schedule this year is only 3% higher compared to that in 2018. While growth is mostly in line for all airlines, the big drop is led by Jet. Jet has submitted its schedule only for the April month as of now. Such a sharp fall in Jet’s capacity will likely be accompanied with some moderation of capacity by MAX operators (SJet) and gradual lease retirals of old A320ceo fleet of IndiGo and Go Air.

* Slot reallocation will become inevitable if Jet debt resolution continues to be delayed.

As of now, it seems there are significant slots of Jet which remain unused. There has been no major change in slots in Delhi and Mumbai barring Jet. However, post April, when Jet has to resubmit its schedule plan; the private airport operators will be increasingly hesitant to keep such a high share of slots unused. As such, some slots may be up for grabs for other airlines.

* Without slots, Jet will have minimal interest from any investors.

The slot portfolio of Jet with high share of tier I airports like Delhi/Mumbai is the key attraction for any prospective bidder in Jet.

* A-321 fleet with 222 seats will be an added advantage for IndiGo.

This will help IndiGo gain incremental passenger market share. The capacity market share for IndiGo has already touched ~45% in Feb’19.

 

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