Aviation share price target

In August 2024, the total number of passengers carried by Indian domestic airlines increased 5.7% YoY to 131.3 lakh. Total departures by scheduled carriers increased by 3% YoY to 88,675.

In June 2024, the total number of passengers carried by Indian domestic airlines increased 5.4% YoY to 132.1 lakh. Total departures by scheduled carriers increased by 4.3% YoY to 85,831.

The Indian airline industry is soaring – passenger volume growth has exceeded pre-covid levels and has grown around 13% in FY24. This comes as Indians have shown a growing appetite for air travel.

The total number of passengers carried by domestic airlines increased by 4.8% YoY in February 2024 to 126.5 lakh. Total departures by scheduled carriers rose marginally by 0.7% YoY to 82,291.

The total number of passengers carried by domestic airlines increased by 4.7% YoY in January 2024 to 131.3 lakh. Total departures by scheduled carriers declined by 4.6% YoY to 84,491.

The total number of passengers carried by domestic airlines rose by 9% YoY in November to 127.4 lakh. Total departures by scheduled carriers increased by 6.9% YoY, but fell by 2.4% MoM to 85,906.

Total number of passengers carried by domestic airlines rose by 10.8% YoY in October to 126.4 lakh. Total departures by scheduled carriers also increased by 6.1% YoY to 88,008. The sector is expecting higher profits for the December quarter.

Total number of passengers carried by domestic airlines rose by 18.3% YoY in September to 122.5 lakh. Total departures by scheduled carriers also increased by 9.7% YoY to 84,088

The total number of passengers carried by domestic airlines rose by 22.8% YoY in August to 124.2 lakh. Total departures by scheduled carriers increased by 10% YoY to 86,076.

Higher ATF prices and lower PLFs points toward the likelihood of an overall weaker spread in Q2FY24. However, IndiGo being able to maintain higher passenger market share despite lower PLFs indicates better operational aircraft availability than peers. The headlines [Link] have also been dominated by the possible increase in aircraft on ground based on the outlook shared by PW.

Manufacturing issues in engines/aircraft across OEMs make for a tight aircraft market globally in CY23/CY24. With fresh issues being discussed in Boeing as well as Airbus, it is more than likely that recovery in aircraft supply will be delayed. Empirically, the aircraft supply models have always underwhelmed in the past for India due to OEM issues (small reason) and weak airline balance sheets (major reason) leading to almost stagnant fleet of ~650-700 aircraft in India for the last four years.

Total number of passengers carried by domestic airlines rose by 24.7% YoY to 121 lakh in July. Total departures by scheduled carriers also rose by 11.5% YoY to 85,032.

Q2 (Jul-Sep) is typically the weakest quarter for airlines. This is exemplified by the fact that Q2 profit contribution has been on average 13% for IndiGo during FY16-18. In line with the trend, Jul’23 PLF has decreased significantly for most airlines. Notwithstanding weak Q2, we remain constructive on supply-demand balance of Indian aviation in the medium term, which is our investment thesis for IndiGo.

The total number of passengers carried by domestic airlines increased by 18.7% YoY in June to 124.9 lakh. Total departures by scheduled carriers also rose by 0.9% YoY to 82,304.

The absence of Go First and weak operations of SpiceJet have resulted in significant market share gain for IndiGo in Q1FY24. This may lead to strong earnings in Q1FY24 for IndiGo, especially considering Jun’23 domestic PLFs have been higher than 90%.

Beyond the sectoral tailwinds for IndiGo (Link), outlook for Q1FY24 earnings for IndiGo is strong on the back of 1) strong passenger growth seen in April/May (up 26% YoY); 2) lower ATF prices (down 11-15% between Q4FY23 and Q1FY24); 3) higher PLFs (91.5% in May’23) and 6) robust yields (we expect average yields to be 6% higher on QoQ basis.

Outlook for airlines, especially IndiGo, remains strong as evident from several data points including: 1) healthy average daily domestic traffic at 427k levels in Q1FY24 with increasing PLFs; 2) gradual decline in top-10 airports’ share in overall traffic indicating increasing air travel penetration in India.

Domestic passenger trend remains strong with daily count of more than 420k. This is also complemented by an increase in PLFs as we enter the seasonally strong Q1FY24, as illustrated by Apr’23 PLFs.

Less than five years after the grounding of Jet Airways, the Indian aviation industry is witnessing another airline heading for a crash landing.