IndiGo’s market share skyrockets but rivals could clip its wings
InterGlobe Aviation Ltd continues to soar higher. InterGlobe runs the IndiGo airline whose domestic market share has been on an uptrend lately. Recent data from the Directorate General of Civil Aviation (DGCA) shows that IndiGo’s market share hit a record high of 63.2% in June. As the chart alongside shows, the rise in June marks the fifth consecutive time of month-on-month increase in the aviation company’s market share.
IndiGo seems to be the biggest beneficiary from the suspension of Go First’s operations. Note that the market share of the Air India group (comprising Air India, Vistara and Air Asia) dropped slightly by 50 basis points month-on-month to 25.8%. One basis point is 0.01%.
The moot question now is whether IndiGo can maintain this record high market share going ahead. That would be a tall order especially in the backdrop of new entrants and resurgence of other airlines. For instance, Akasa Air, which began its operations in August, surpassed the passenger count of SpiceJet Ltd in June.
“We expect IndiGo’s market share to roll back to 58-60% in the medium term with some airlines seeing capital infusion and the potential expansion of Air India’s fleet in FY24,” said an analyst requesting anonymity.
Anyhow, IndiGo is likely to see a strong June quarter (Q1FY24). The number of passengers carried by the airline is higher by nearly 28% year-on-year and 12% sequentially in Q1, as per DGCA data. Yield, a measure of pricing, is expected to be robust aided by seasonality and higher airfares due to the grounding of Go First. Moreover, IndiGo’s passenger load factor is up in Q1 and that augurs well. In the March quarter, IndiGo’s yield stood at ₹4.85. Further, the drop in prices of aviation turbine fuel bodes well for margin.
Beyond Q1, the strength in yield requires closer tracking. “In July-23, occupancy across carriers have slipped reflecting seasonality and such is also reflecting in moderation in fares,” said analysts at Jefferies India in a report on 13 July. However, the demand supply dynamics remain favourable, which is a positive.
Further, one needs to keep an eye on fuel prices. Jefferies analysts note that aviation turbine fuel prices increased 2% month-on-month to ₹92,000 per litre in July, clocking the first increase in six months.
Nonetheless, factoring a brig-hter picture adequately, IndiGo’s shares have gained by 32% so far in 2023. But risk continues to loom in the form of competition, which is heating up in domestic aviation market.
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Updated: 16 Jul 2023, 08:49 PM IST
