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Domestic pax growth of 11% YoY in Oct-23; a weak November

India’s domestic pax traffic grew 11% YoY to 12.6mn in Oct-23, while daily trends in Nov-23 till date reflect a muted ~2% traffic growth YoY, despite the peak festival season. Indigo and Tata Group continue to command total domestic pax share of ~90%. In Oct23, Indigo’s market share was slightly down, by 80bps MoM, while Spicejet re-gained 60bps to 5% market share. Tata Group saw a marginal gain, of 0.3% MoM in Oct-23.

Load factors under pressure; Spicejet’s OTP sees notable drop

During Oct-23, Passenger Load Factors (PLFs) declined MoM for Vistara/Akasa/Indigo/Spicejet by 280/150/140/130bps to 89.2/86.6/83.3/90.1%, respectively. However, Air India and AirAsia witnessed PLF improvement MoM, of 80- 90bps each. Indigo’s OTP improved to 88.5% in Oct-23, while Spicejet’s OTP fell to 58.1%, from 67.2% MoM; albeit the Nov-23 run-rate is better. Air India/AirAsia/Vistara’s OTP stood at 77.5/82.8/81.5%, respectively. MoM cancellations reduced across the board, but stood at 0.54% for Indigo.

Fuel prices on a downtick; to support spreads

OMCs have lowered the domestic ATF price by 6% MoM for Nov-23 to Rs111.3/ltr, on account of lower refining-marketing spreads. We foresee a 4-5% cut MoM in ATF price for Dec-23, driven by 7% lower crude prices. Brent is currently trading at sub-USD80/bbl levels, thereby hinting at further price cuts ahead, assuming constant downstream chain margins. A period of strong yields backed by seasonal base-fare increase and fuel charges is likely to be followed by reversals, given the weaker pax-volume scenario, though lower fuel prices are likely to support airlines’ PBT spreads.

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