India Aviation — Supply Tightness Portends Better Profitability: ICICI Securities

ICICI Securities Report

We have maintained a tight supply outlook on the Indian Aviation within domestic segment in near to medium term driven by-

1. replacement cycle by big players like Interglobe Aviation and Tata group,

2. weaker balance sheet for smaller airlines post Covid and

3. internationalisation of Indian airlines.

This results in a good yield outlook and in turn profitability. The spreads will likely further benefit from an increase in international mix apart from any movement in crude prices.

Weekly departures have remained in the range of 22,000-25,000 for 2019-2023. DGCA has approved 229,000 weekly departures for Summer Schedule 2023, up 4.4% over winter schedule of 2022.

Indigo/GoFirst/Air India/Akasa has seen a growth of 14/11/9/57%, while SpiceJet Ltd./Air Asia/VIstara has seen a decline of 30/0.4/4.4% during the same period.

Beyond departures, IndiGo, however, will likely benefit from higher A321 mix in the fleet (increased from one in Q4 FY19 to 78 as of Q3 FY23, representing 25% of total fleet size).

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