Wednesday, December 11, 2019

SpiceJet may gain from IndiGo’s move to cut capacity addition

SpiceJet, India’s second-largest airline by market share, may benefit from the recent cut in incremental capacity by IndiGo Airlines for FY20.
In its recent communication to analysts, India's largest airline by market share InterGlobe Aviation, which runs IndiGo Airlines, cut its capacity addition to 22-23 per cent from the earlier guidance of 25 per cent for FY20. The airline cut its capacity addition guidance primarily due to engine-related issues of its Airbus A320neo aircraft.
Analysts believe that SpiceJet may gain reasonably from this cut. Indi-Go's cut in its incremental capacity by 2-3 per cent reduces the industry's capacity which provides some scope for SpiceJet to show some aggression in adding more room.
SpiceJet may induct Boeing 737 Max planes in January next, which have higher seat capacity (220 as opposed to 180 in Boeing NG) and are more fuel-efficient (12-15 per cent) than Boeing 737NG (Next Generation) aircraft. SpiceJet can deploy a part of its capacity in the next six months to gain from last-minute flight bookings which also promise high yields.
It may replace a few Jet Airways’ aircraft with the new Boeing 737 Max. IndiGo followed the same strategy in the past few years by pushing up its capacity in the past few years. SpiceJet also gained from the Jet Airways debacle.
11/12/19 Rajesh Naidu/Economic Times

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