Air passenger traffic in India grew by 25% in January

  • India’s aviation sector recorded a 25% year on year, traffic growth, carrying the most domestic passengers, brokerage house Anand Rathi said in a report recently. The industry passenger-load factor (PLF) was constant at 83% (83.2% a month ago). Indigo, Jet Airways 7.38 % and Spicejet 7.11 % continue to hold around a 71% market share among themselves. Aviation turbine fuel (ATF) was up 8% month on month.

    While the aviation sector grew by 25% in Jan’17. Domestic airlines carried 9.6 million passengers that month, compared to 7.7 million a year ago. The number of passengers for Apr’16 to Jan’17 rose 23% yoy, indicating a structural upswing in demand.

    The passenger load factor in Jan’17 has been almost the same as the month prior, primarily due to the end-of-tourist season.

    Load Factor: The PLF for Jan’17 was 83.2%, declining 21bps mom (from 80.2% a month ago). After reporting its highest ever load factor in Dec’16 (93.7%), Spicejet’s Jan’17 PLF was constant, 10bps down to 93.6%. Indigo’s PLF came at 90%, down 140bps mom, from 91% a month ago, Including Jet-lite, Jet Airways’ PLF was 86%, up 20bps month on month.

     

     

    Market share: In Jan’17 Indigo reported a 39.8% market share, down 51bps month on month. Spicejet’s market share, at 12.8%, was the same as the previous month. Jet Airways also reported a consistent 18% market share. In comparison to Q3 FY17, Indigo, Jet Airways and Spicejet’s Jan market share combined was down 130bps to 70.6% (from 71.9%).

    Mom decline in ATF prices: ATF prices during the month increased. The average ATF price was up 8%, The World Bank estimates that international crude prices would be steady in the next two years, at between $40 and $60 a barrel.

    Favourable outlook: The Indian aviation sector is one of the top-10 aviation sectors in the world. It has a high growth trajectory. Demand is expected to shoot up to over 20% during FY17-19. While demand continues to be very strong, yields are comparatively softer yoy, which may dent overall profitability.

    Valuation:  Anand Rathi said they continue to be bullish on Spicejet and Indigo. At the current market price, Spicejet’s stock trades at 5.2 times its FY19 adjusted EV / EBITDAR. Indigo’s at 6.5 times FY19 adjusted EV / EBITDAR. Anand Rathi said it maintained a buy recommendations on Spicejet and Indigo, with targets of Rs 150 and Rs 1,040 respectively.