Monday, December 03, 2018

Big turbulence: IndiGo lone survivor as aviation sector suffers huge losses

Unable to cope with falling yields, all airlines except IndiGo are slowing down. While IndiGo topped up capacity by 30% year-on-year in October, the increase for the rest of the sector was a shade above 9% y-o-y. This was way slower than the 18.9% y-o-y rise seen in June and 12.3% y-o-y in August.

Analysts say IndiGo is leveraging a strong balance sheet to gain market share and remains unfazed by falling yields. The low cost carrier’s share rose to an enviable 42.8% in October 2018. In contrast, SpiceJet reported a share of 11.7%, its lowest in more than two years. GoAir had just 8.8% compared with an average of 9% for 2018. Jet Airways and its low-cost subsidiary JetLite commanded a share of 14.9% and national carrier Air India had 12.2%.

Jet Airways and Air India continue to suffer from basic working capital like payroll spend; Vistara and AirAsia are still in deep losses and SpiceJet and Go struggle to prevent balance sheet erosion,” analysts at ICICI Securities wrote recently.
SpiceJet upped capacity by just 5% y-o-y in October while Jet Airways and Air India added 3% y-o-y. Indigo’strong cash balances of `12,702 crore at the end of September, analysts say would help it gain share at a time when passenger traffic is growing. The carrier is expecting deliveries of A320neos, and has said it would ramp up capacity in FY19 by 30%.
“We expect a year over year capacity increase in terms of available seat kilometres of 35% for the third quarter. For the full year, we expect capacity increase of 30%,” Rahul Bhatia, interim CEO, IndiGo, said at earnings call.
03/12/18 Arun Nayal/Financial Express