Aviation Sector Update - Demand robust; IndiGo market share flat MoM By Motilal Oswal Financial Services Ltd
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Demand robust; IndiGo market share flat MoM
* Domestic air passenger (PAX) traffic grew ~8% YoY in Dec’23 to 13.8m (up ~8% MoM). It was also above pre-Covid levels. Passenger growth was robust for almost all the airlines, with AI Group, SpiceJet and Akasa posting double-digit growth on MoM basis.
* Passenger load factor (PLF) increased MoM for all the airlines in Dec’23. The average domestic PLF was 83.3% (marginally up MoM). On-time performance (OTP) declined MoM for airlines and the domestic average was 59.9% in Dec’23. The cancellation rate increased for the second consecutive month to 1% in Dec’23.
* IndiGo has seen its market share rise after the collapse of GoFirst, which stopped operations in May’23, and has surpassed 60% since then. However, it lost market share in the previous two months, but it was flat in Dec’23. The management expects incremental 35 aircraft to be grounded from 4QFY24 onward as they are being recalled by P&W for various issues, including powder metal one.
India's domestic air PAX and market share
* India's domestic air PAX increased ~8% YoY (~8% MoM) to 13.8m in Dec’23 (vs. ~9% YoY in Nov’23). Demand remained healthy, buoyed by post-festive demand and the holiday season.
* Domestic PAX stood at 8.53m for IndiGo (up 22% YoY), 3.85m for Air India group (up 10% YoY), 0.6m for Akasa (up ~2.1x YoY), and 0.77m for SpiceJet (down 20% YoY).
* Domestic market share stood at 61.8% for IndiGo (up 680bp YoY), 27.9% for Air India group (up 50bp YoY), 4.4% for Akasa (up 210bp YoY), and 5.6% for SpiceJet (down 200bp YoY).
Domestic industry’s PLF and OTP
* Domestic PLF stood at 83.3% in Dec’23 (down 550bp YoY, up 20bp MoM).
* PLF stood at 90.7% for IndiGo (up 320bp YoY), 90.2% for Air India group (down 10bp YoY), 93.9% for Akasa (up 10pp YoY), and 93.5% for SpiceJet (up 80bp YoY).
* Average OTP for domestic airlines at the top four airports declined to 59.9% (down ~11pp YoY/720bp MoM).
* OTP stood at 68% for IndiGo (down ~21pp YoY), 63% for Air India group (down ~13pp YoY), 72.7% for Akasa, and 29.9% for SpiceJet (down ~27pp YoY).
Other highlights
* Air turbine fuel (ATF) price for Jan’24TD was at INR101,993/klit (down 4% MoM). For 3QFY24, ATF price was at INR111,900/klit (up 11% QoQ). Brent crude currently is at ~USD77.5/bbl, while it was at USD83.7/bbl in 3QFY24. Air fares have also declined subsequently.
* Accordingly, IndiGo had imposed a fuel surcharge in the range of INR300-1,000 on airfares. ATF price accounts for 40% of the ticket price. However, the company has subsequently withdrawn the surcharge owing to a decline in Brent prices in Nov’23 and in Dec’23
* However, Indigo announced that for an A321 aircraft with 222 seats, selecting a window or aisle seat on the front row will cost INR2k. It is INR1.5k for the aisle seat in the same row. For the second and third rows, all seat types have a flat rate of INR400.
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