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Passenger traffic for Apr’23 marginally decreased by ~1.0% MoM to 12.9mn. May’23 passenger traffic run rate implies ~13.2mn up 2.4% MoM, representing a level higher than pre covid levels. Last reported domestic PLF for Apr’23 witnessed an improvement MoM across airlines with Indigo’s PLF at ~87.4% (+3.4ppt MoM) while Air India’s PLF stood at ~87.9% (+2.8ppt MoM). Indigo’s market share stood at 57.5% (+0.7ppt MoM) during Apr’23 while Tata group company’s market share stood at 25.0% (-0.3ppt MoM). SpiceJet and GoFirst lost market share during Apr’23 to the tune of 0.7ppt/0.5ppt MoM respectively. Indigo in line with its strategy to expand international operations has added six new destinations across Asia and Africa. The company plans to add 174 new weekly international flights between Jun-Sep23 in order to cater to the rising demand for international travel. Further, recent media articles state Indigo is expected to close in on a record deal to buy 500 narrow body A320 jets. This deal will aid Indigos fleet addition plans and will strengthen Indigo’s leadership position in the Indian airline space.

The aviation sector remains well placed given tailwinds of a) significantly higher airfare (up ~20% QoQ) post suspension of flights by GoFirst b) sharper recent demand comeback (up ~5% QoQ) c) lower crude (down 13.7% QoQ) and stable INR. Indigo is likely to benefit from higher fares and improving demand. However, Rakesh Gangwal’s stake sale continues to weigh on the stock even as business fundamentals witness an improving trajectory. Further, recent media articles suggest Government has asked airlines to devise a mechanism to ensure reasonable airfares amid a surge in air ticket prices. Any cap on airfares remains a key risk on earnings of Airline companies.

* Passenger traffic improves in May’23: Passenger traffic for Apr’23 marginally decreased by ~1.0% MoM to 12.9mn. May’23 passenger traffic is expected at 13.2mn up 2.4% MoM representing 108% of pre covid levels. Last reported domestic PLF for Apr’23 witnessed an improvement MoM across airlines with Indigo’s PLF at ~87.4% (+3.4ppt MoM) while Air India’s PLF stood at ~87.9% (+2.8ppt MoM).

* Indigo continues to gain market share: Indigo’s market share stood at 57.5% (+0.7ppt MoM) during Apr’23 while Tata group company’s market share stood at 25.0% (-0.3ppt MoM). SpiceJet and GoFirst lost market share during Apr’23 to the tune of 0.7ppt/0.5ppt MoM. Indigo in line with its strategy to expand international operations has added six new destinations across Asia and Africa. The company plans to add 174 new weekly international flights between Jun-Sep23 in order to cater to the rising demand for international travel. Further, recent media articles state Indigo is expected to close in on a record deal to buy 500 narrow body A320 jets. This deal will aid Indigos fleet addition plans and will strengthen Indigo’s leadership position in the Indian airline space.

* Go First saga to aid yields for Indian airlines: Go First’s suspension of flights from 3rd May on the back of the airlines decision to sought voluntary insolvency resolution proceedings has resulted in a surge in airfares. Airfares on several leisure routes have increased significantly aiding yields for Airline companies. Go First’s decision to suspend flights was mainly on account of non-availability of Pratt & Whitney engines resulting in grounding of more than half of the fleet. The airline is currently discussing its revival plan with DGCA and has sought approval to restart flights with 22 planes for the next five months. Further, government has asked airlines to devise a mechanism to ensure reasonable airfares amid a surge in air ticket prices. This may have an adverse impact on the high yields being enjoyed by the Airline companies.

* SpiceJet’s liquidity position to be impacted: SpiceJet’s liquidity position is expected to be impacted by Delhi High Court’s orders to pay INR3.8bn to former promoter Kalanithi Maran. SpiceJet is already in discussions with Kalanithi Maran and his firm for a comprehensive settlement and remain confident of resolving the same

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