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Passenger traffic for Jul’25 came in at 12.6mn, down 7% MoM given the seasonal impact. PLF for the month declined across airlines led by Tata Group companies (down 290bps MoM to 78.6%) and Indigo (down 140bps MoM to 84.1%). Indigo gained market share during Jul’25, with its share at 65.2% (vs. 64.5% in Jun’25). Tata Group companies’ market share stood at 26.2% (vs. 27.1% in Jun’25). ATF prices increased to INR 90.1k/KL in 2QFY26, up ~6% QoQ from ~INR86k/KL on the back of higher crude price during the quarter. Metro-tometro routes, which represent a highly competitive segment of the airline industry, witnessed a 2% YoY decline in aggregate traffic over Jan’25-Jun’25, in contrast with the robust 7% YoY growth observed in overall domestic passenger volume during the same period. Globally, supply chain challenges persist, with Airbus and Boeing reporting backlog of 8,742 and 6,581 aircraft respectively - equivalent to ~10.7 and ~11+ years of production respectively. Spicejet has finalised a lease agreement for another five Boeing 737 aircraft to cater to the peak winter and early summer demand. Spicejet returned to profitability in 4QFY25 and is expected to report its 1QFY26 results on 5th Sep’25. Under new GST reforms, Economy class GST rate is unchanged at 5% while Business class rate changed from 12% to 18%. We expect no material impact on travel as price sensitivity for business class passengers remains low. Indigo’s profitability is expected to remain muted in 2Q given a) higher ATF prices b) weak INR (down 2% since Jun’25) and a c) seasonally subdued quarter. We expect PAX yield to increase marginally, while PLF has witnessed some uptrend YoY in Jul-Aug’25. We retain a constructive view on the Indian Aviation space amidst a HOLD rating on Indigo given its rich valuations.

• PLF declines sequentially across airlines; Indigo gains market share: Domestic PAX for Jul’25 stood at 12.6bn, down 7% MoM given a seasonally weak quarter. PLF for the month of Jul’25 declined across airlines led by Tata Group companies (down 290bps MoM) and Indigo (down 140bps MoM). Indigo reported a market share of 65.2% for the month, a gain of 67bps MoM. Tata Group airlines’ market share declined to 26.2%, down 85bps MoM while Akasa’s market share went up by 23bps to 5.5%. Under new GST reforms, Economy class GST rate is unchanged at 5% while Business class rate changed from 12% to 18%. We expect no material impact on travel as price sensitivity for business class passengers remains low.
• Higher ATF prices likely to impact margins of airline operators: The price of ATF, which forms a major chunk of operating cost (i.e., 45-50%) for airlines, increased to INR 90.1k/KL in 2Q compared to INR 85.2k/KL in 1Q (up 7% QoQ). ATF prices came in higher on the back of higher oil prices. This higher fuel cost could result in subdued margins for the airlines in 2Q (refer exhibit 13 for Indigo’s sensitivity to crude prices).
• Indigo’s capacity growth on track; 2Q to remain muted given seasonality and weak INR: As of 30th Jun’25, Indigo had a fleet size of 416 aircraft including 26 A320 CEOs, 187 A320neos, 141 A321neos, 48 ATRs, 3 A321 freighters and 2 B777 (damp lease). The company signed an agreement to damp lease 6 Boeing 787 wide-body aircraft with North Atlantic Airways – it received 1 aircraft and expects to receive the remaining in 2HFY26. Indigo has also received deliveries of 19 aircraft from Airbus (A321neo) in 2025 till Jul’25. Indigo’s profitability is expected to remain muted in 2Q given a) higher ATF prices b) weak INR and c) a seasonally subdued quarter. We expect PAX yield to increase marginally, while PLF has witnessed some uptrend YoY in Jul-Aug’25.
• Spicejet to induct Boeing 737s to meet winter demand; 1QFY26 result awaited: Spicejet has finalised a lease agreement for another five Boeing 737 aircraft to cater to the peak winter and early summer demand. This is in addition to induction of five aircraft announced earlier by the airline, taking the total number of new fleet additions to 10. Most of the aircraft are expected to join the fleet in Oct’25 and will remain with the company till May’26. Spicejet reported profit in 4QFY25 with EBITDA at INR 730mn, up from EBITDA loss of ~INR 2.4bn in 4QFY24 supported by higher yield. It is expected to report its 1QFY26 results on 5th Sep’25
• Domestic metro-to-metro traffic remain subdued: Metro-to-metro routes represent a highly competitive segment of the airline industry, where carriers prioritise visibility and market presence. Over Jan-Jun’25, aggregate traffic on these routes fell by 2% YoY. This contrasts with the robust 7% YoY growth observed in overall domestic passenger volumes during the same period.
• Supply chain challenges persist as OEM backlogs remain elevated: As of 30th Jun’25, Airbus and Boeing reported order backlogs of 8,742 and 6,581 aircraft, respectively. Based on Bloomberg estimates of ~820 deliveries by Airbus in 2025, Airbus’ backlog equates to 10+ years of output. Similarly, Boeing’s backlog stretches to ~11+ years of output (~550 deliveries expected in 2025 as per Bloomberg). These elevated levels underscore the ongoing challenges both OEMs face in scaling up production, with persistent supply chain constraints and tariff-related uncertainties clouding the timeline for capacity ramp-up. On deliveries, Airbus handed over 766 aircraft in CY24 (up 4% YoY), while Boeing delivered 348 aircraft (down 34% YoY), reflecting continued operational headwinds.

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