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Regulations continue to maintain a common ground among airlines as of now; covid continues to thwart international travel

Government maintains calibrated approach in increasing allowable domestic capacity, in-line with covid situation in India and regulating fares in-line with the cost of fuel. This should ensure profitable operations at a variable cost level for all low cost carriers. However, this also ensures an operational parity between larger and smaller airlines. This fundamentally will lead to higher absolute losses for IndiGo compared to other airlines owing to its larger scale of operations and hence, larger fixed costs. Continuous delay in international operations will remain another reason for losses.

As such, current times could be right for entry of new airlines as heard in media (Link) considering the significantly weaker balance sheet for incumbent airlines. However, capacity control of existing airlines and allowance of new airline will be contrasting measures. Price regulation will also be a difficult exercise going ahead with increasing demand in festive season. Continued impact of covid in international sectors (Link) and rising fuel prices (average domestic aviation prices are up ~49% up in CY21) remain overhang in near term.

Average daily flier normalised at 213K in W.E 14th Aug’21

Weekly average daily fliers came in at 213k in the week ended (W.E) 14th Aug’21 vs 227k in the W.E. 07th Aug’21. For the W.E. 14th Aug’21, average number of departures dipped to 1,846 vis-à-vis 1,937 in the prior week. The number of fliers per departure declined marginally to 115 vs 117 in the prior week. Average daily fliers fell 5.9% WoW due to 4.7% decline in departures and 1% decline in number of fliers per departure.

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