Emkay Global Financial's research report on InterGlobe Aviation
India’s air passenger traffic growth continues to be resilient with Q4FY23 showing strong numbers despite being a seasonally lean quarter. Domestic pax in FY23 would be ~136mn, slightly above our earlier estimate of 135mn; while going by Mar-23 run-rate, FY24 could easily hit our 165mn estimate with a high chance of bettering it. Against our 15% medium-term pax CAGR, net fleet addition (despite Air India’s mega order) should be 10-11%, thereby keeping theoretical supply lower than demand, which would support PLFs and yields. Fuel costs have come down further with crude as well as jet kero prices correcting, while improving diesel margins of Indian OMCs could lower ATF marketing margins as well. The recent commentary by airlines, industry bodies, and MoCA officials implies a strong outlook for the Indian aviation sector, as is evident from new order announcements, regulatory approvals w.r.t. wet-leasing, and airport infra development. Indigo, with its dominant position, low-cost leadership, and running order book of 487 aircraft, is best-positioned to capture the sectoral drivers.
The summer schedule with ~20% lower flights YoY for other airlines as a whole vs. 3% growth for Indigo implies the latter is well placed in terms of near-term capacity availability, despite 34 AOGs (102 for the industry). We reiterate Buy with a TP of Rs2,600.
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