Nitin Agrawal Moneycontrol Research
Highlights: - Lowest passenger growth in last four and half years - Load factors across carries witnessed significant decline - Recent fall in oil prices to augur well for the industry - Prefer IndiGo and SpiceJet --------------------------------------------------
Indian aviation industry continues to struggle and festive season could not bring cheer to the players in the industry. This is evident from the moderate year-on-year (YoY) growth of 11 percent in passenger registered by the industry in the month of November 2018, the lowest in last four and half years. This was, primarily, due to price hike taken by the airline companies to offset the impact of significant rise in airline turbine fuel (ATF) prices.
The industry continues to add significant capacity which expanded by 978 bps on YoY basis. This coupled with low passenger growth led to YoY contraction of 506 bps in overall load factor. Revenue passenger kilometers (RPK) witnessed a growth of 13.2 percent as compared to 16.4 percent it achieved last year.
The significant fall in the oil prices in recent months may help airlines reduce fares and witness passenger growth. Fall in oil prices would improve the profitability of the companies. We continue to prefer IndiGo and SpiceJet from the space.
Operating Statistics for November 2018
IndiGo Interglobe Aviation (IndiGo), the leader in Indian aviation industry, is the clear winner and beneficiary of the problems at the debt-laden Jet Airways. It registered a YoY passenger growth of 21.2 percent and expanded its market share by 350 bps. Although, the passenger growth was lowest in last six months due to the fuel surcharge that the company started to charge its customers to offset the impact of rise in ATF prices. During the month of November 2018, it grew its capacity by 30.1 percent.
In the month, load factor contracted to 84.9 percent from 90.7 percent it registered in the same month last year.
SpiceJet SpiceJet slightly underperformed industry with 10.2 percent YoY Passenger growth. Its RPK witnessed a YoY growth of 13.2 percent as compared to 16.9 percent growth it achieved last year. It continues to maintain load factor above 90 percent but the same contracted by 445 bps (YoY). What is noteworthy in case of SpiceJet is its significant capacity addition. Its capacity registered a YoY growth of 18.7 percent.
Jet Airways Rising fuel prices, significant debt burden and interest outlay have started putting Jet Airways’ day to day operations under pressure. It witnessed a decline of 9.2 percent in its passenger growth and lost 310 bps in its market share. There was hardly any capacity addition by the carrier in the month.
GoAir A small player in the Indian skies in terms of its market share, GoAir maintained its share for the month. However, it witnessed a very low YoY passenger growth of 9.2 percent as compared to 29.8 percent it achieved last year. Load factor also contracted by 242 bps. GoAir’s capacity addition growth was lower in the November 2018 as compared to last year.
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