Go First Insolvency: IndiGo may ride the tailwind, analysts see duopoly ahead

Go First has cancelled all flights until May 5 and promised to refund passengers who have booked tickets.

The filing of voluntary insolvency by budget carrier Go First Airlines could end up pushing India's aviation into a duopoly, with existing airlines finding it a steep climb to meet the rising domestic demand, according to key brokerage reports. Top aviation analysts agree that Interglobe Aviation (IndiGo) is likely to benefit as Go First suddenly folds up.

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According to Credit Suisse, the Go First bankruptcy can benefit IndiGo in terms of higher market share, stronger yields in a capacity-constrained environment and increased leveraging power against global OEMs of engines and aircraft.

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Credit Suisse added that lessors might be keen to allocate some of the Go First aircraft to IndiGo, given their similar fleet type. Something similar happened in favour of Spicejet based on the fleet type overlap when Jet Airways had to shut operations in 2019.

However, reviving the GoFirst airline post-bankruptcy might be difficult, as is evident in the case of Jet Airways, some brokerages noted. Jefferies said that there is low risk for lenders involved in the Go First case, as most of the liabilities are lease liabilities.

The airline owes its creditors, which include lenders like Bank for Baroda, ICICI Bank and Central Bank of India, over Rs 6,500 crore.

Bank of America Securities said the development is expected to tighten the aviation landscape in India, as Go First accounted for nearly 9 percent of the total domestic supply. A recent BofA note said, "We believe IndiGo's unique growth opportunity as the lowest cost provider with the largest market share in the structurally growing Indian aviation market is not priced at 13.5x FY25E EPS."

Credit Suisse gave the 'outperform' rating to IndiGo stock, giving a target price of Rs 2,450. BofA Securities rated the stock as a 'Buy' with a target price of Rs 2,700.