Tuesday, July 16, 2019

IndiGo, SpiceJet flying into better times: What Q2 has in story amid aviation turbulence

The grounding of debt-laden rival Jet Airways and benign fuel prices have benefitted low-cost airlines SpiceJet and IndiGo in the Apr-Jun quarter. The Jet Airways fiasco led to an increase in fares in the peak holiday season on the back of capacity crunch. With Jet Airways suspending operations, incumbents expanded their operations fast, capturing the void left by Naresh Goyal-founded airline. While IndiGo added 17 aircraft in the quarter, Spicejet added 30, taking its overall fleet count to 106. Analysts with which Financial Express Online spoke are positive on IndiGo and SpiceJet.

Capacity constraints in peak holiday season due to Jet Airways’ suspended operations and grounding of Boeing 737 Max aircraft has led to a rise in airfares. Despite the flat domestic passenger traffic growth over April-May, airlines are expected to see another stellar quarter and report strong margins and profitability owing to high yield environment and soft ATF prices, down 1.2% year-on-year, Prabhudas Lilladher said in a report.
“There are cycles in this sector. It’s not a secular growth kind of story. India has been facing a downturn since the past couple of months. Now everyone will go into international operations which will expand their operational leverage as they are low cost, so their average selling price per seat will be higher than what they charge for the same distance on the domestic side. So their margins will expand further. So if the crude remains stable at $70-75 per barrel, they will be able to expand their operative margins. So, I am positive about the sector,” Sameer Kalra, Founder and Research Head at Target Investing, told Financial Express Online.
16/07/19 Monika Yadav/Financial Express

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