Aviation News

IndiGo maintaining market share even with lower PLFs, ET Infra


<p>Representative Image</p>
Representative Image

According to a recent aviation sector analysis by ICICI Securities, higher ATF prices and lower Passenger Load Factors (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 have also been dominated by the possible increase in aircraft on ground based on the outlook shared by Pratt & Whitney. IndiGo may mitigate the impact through secondary leases, as per reports.

Additionally, OEM compensation might take care of incremental cost burden of secondary leases. As such, ICICI Securities remain positive on InterGlobe Aviation basis structurally favourable supply demand equation in India and the vantage position of IndiGo.

The monthly domestic traffic is expected to be around 12-12.5 million in June to August 2023. In August 2023, there was growth in the total number of passengers, which was 12.4 million as compared to 12.1/12.5 million in July/June 2023. Extrapolating the recent trends, September 2023 traffic could reach 12.2 million. IndiGo maintains more than 63 per cent of the market share, with its market share standing at 63.4 per cent MoM, while Tata Group’s combined market share stood at 26.8 per cent in August 2023.

PLF for IndiGo remained muted for the second month in a row at 83.6 per cent in August 2023. However, SpiceJet/Vistara saw an increase of 2.0/4.3 per cent to 90.9/91.3 per cent, respectively, in August 2023. Despite lower PLFs, IndiGo was able to maintain its domestic market share, which indicates better aircraft/pilot availability for it as compared to other airlines.

DGCA raises IndiGo engine failure issue with Pratt & Whitney

The Directorate General of Civil Aviation (DGCA) has demanded that Pratt & Whitney identify the cause of engine damage and share data on engine failures globally, according to a statement by the ministry. Pratt & Whitney and IndiGo, India’s biggest airline by market share, did not immediately respond to Reuters requests for a comment.

Average ATF prices in Q2FY24TD were 6.8 per cent higher than Q1. Lower PLFs and higher ATF may lead to lower spreads in Q2, but the profit contribution from the seasonally weak Q2 is normally low (average 12.9 per cent over FY16-FY18).In the wake of increased grounding, IndiGo could explore secondary markets. Pratt & Whitney indicated that fleet groundings would average 350 at any given time through 2026, while it could ground 650 Airbus A320neos at one time early next year. Lufthansa indicated that the accelerated GTF removals are likely to result in the grounding of 20 of its A320neos on average in 2024.

IndiGo’s possible grounded aircraft count in such a scenario could rise. To manage the deficit at all points of time, the average grounded fleet may not be the right parameter, but the peak grounding quantum should also be a consideration., said ICICI Securities. As such, IndiGo could resort to A320 ceos from the second-hand market as of now.

  • Published On Sep 18, 2023 at 02:33 PM IST

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