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Jet Fiasco; Pax growth vanishes; fares zoom
March domestic passenger (pax) traffic grew just 0.1% YoY as the industry reels from ticket cancellations caused by Jet Airway’s ongoing financial plight & grounding of Boeing 737 Max leading to capacity constraints. Domestic capacity addition (ASK) grew moderately by 5% while the industry reported PLFs of 87%. IndiGo - the market leader, reported pax/ASK growth of 19%/26% YoY as it made the most from Jet’s loss, further expanding its market share by ~350bps MoM to 47%. Impacted by grounding of Boeing 737 max, SpiceJet’s growth momentum slowed down with Pax/ASK growing by 7%/13% while its market share declined marginally by ~10bps MoM to 13.7%. Given that the favorable yield environment led by capacity constraints is expected to continue in near term, we upgrade our assigned multiples (FY21 EV/EBITDAR) for IndiGo & SpiceJet to 8.8x (previously 8.5x) & 8.3x (previously 8x) respectively. Retain BUY on IndiGo & SpiceJet with revised target price of Rs1,623/- and Rs135/- respectively.
* Domestic passenger growth flat at 11.6mn:
For Mar’19, India’s domestic passenger (pax) traffic grew by marginal 0.1% to 11.6mn pax. IndiGo reported 19% growth in Pax to 5.4mn while SpiceJet carried 1.6mn (up 7% YoY). Jet Airways (including Jet lite) saw a 65% YoY decline in pax traffic to 0.7mn. Go Air/Vistara & AirAsia India reported a pax growth of 10%/11% & 31%
* IndiGo expands market share by ~350bps MoM to 47%:
Taking advantage from grounding of Jet Airways & Boeing 737 Max, IndiGo further consolidated its leadership position in the domestic market (pax carried) as its market share expanded by ~350bps sequentially to 47%. With the grounding of Boeing 737 Max in the midst of March, SpiceJet saw a marginal blip in its market-share to 13.7%. Go Air/ Vistara/ AirAsia India gained market share at Jet’s expense and reported a share of 10%/ 4%/ 6% respectively.
* Domestic capacity growth moderates to 5%:
For Mar’19, domestic ASK growth slowed down to 5% YoY (lowest in the past 16 months) as the industry continued to witness capacity pull-out. IndiGo, however continues to aggressively add capacity as it reported 26% YoY increase in ASK. SpiceJet reported 13% YoY growth in ASK. However, Jet with only a handful of aircrafts operating due to the ongoing financial crisis, its ASK declined by 66% YoY. Go Air/ Vistara/ AirAsia India reported ASK growth of 8%/ 14%/ 43% respectively.
* SpiceJet continues to lead the way with 90+% load factors:
Even though fares having shot up due to capacity pangs, the industry operated at high load factors (87% Mar 19). With Pax Load factor (PLFs) at 93%, SpiceJet reported 90%+ PLFs for the 47th consecutive month. IndiGo continued to report strong PLFs (86% for Mar 19). Go Air/ Vistara/ AirAsia India clocked in PLFs of 91%/ 87%/ 89% respectively.
* International Pax traffic de-grows by 2%:
For Mar’19, International pax traffic de-grew by 2% to 2.1mn. However, IndiGo continued to expand its international footprint by carrying 0.5mn pax (up 60% YoY). IndiGo market share stood at 24% (21% Feb 19), thus making it the second largest Indian carrier.
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