Sector Update

Aviation Monthly-Snapshot Oct’19

Institutional Equity Research | India

Festive demand stays weak too November 19, 2019

 Domestic pax growth remains weak (grew by a mere 4%); capacity

addition was flat YoY as incremental capacity only replaces Jet’s
 Softening in yields despite lower volumes even in festive season
indicates cooling demand; PLFs across the sector is up 100bps
YoY to 84% driven mainly by 200bps improvement in PLFs IndiGo SBICAPs Q2FY20 Result notes
 International expansion continues to be a near-term focus. Low
MAX woes in a weak quarter Spicejet
yield in a seasonally strong 3Q will weigh on sector profitability result note LINK
Airline-wise details
Hurt by ageing fleet, weak INR:
IndiGo: Indigo has been a major beneficiary of Jet Airways ceasing operations. It flew Downgrade to HOLD IndiGo result
5mn passengers in Oct’19, up c15% YoY (Sep’19 growth at 13% YoY was lowest in note LINK
last 2 years), and increased its domestic market share by 540bps to 47.4%. Domestic
PLF improved 200bps to 85%. SBICAPs recent published notes
SpiceJet: Operating Jet Airways’ fleet (30 nos till date) has helped SpiceJet sustain Losses don’t dampen spirits; Catch-
market share gains that it lost due to grounding of its Max aircraft. It grew c45% YoY up WIP for SJET- LINK to our
(highest YoY monthly growth in last 3.5 years) and increased its market share 308bps detailed note on ARA of IndiGo and
to c16% (Sep’19 market share c15%). PLFs fell c80bps YoY to 90%. SJ
GoAir: GoAir continued its aggressive growth in FY20; it grew by c32% (grew by
FX depreciation, not volatility the key
c29% in H1FY20) and regained its market share (~11.2% in Oct’19, up 270bps YoY). risk- LINK to our detailed note
PLFs, though, fell 100bps to c83%. The airline continued to top OTP with almost
c80% of its flights arriving on time (H1FY20 average was 87%). Aviation News Wrap
Other airlines: Among others, both Vistara and Air Asia grew ahead of the market at
IndiGo run by board; if there’s anyone
52% and 25%, respectively, albeit on a relatively lower base. Together, they hold
I talk to, it’s Chairman: Ronojoy Dutta
12% market share, up 290bps YoY. Vistara’s/AirAsia PLFs fell 180bps/70bps to
LINK
77%/83%.
Weak demand keeps yields in check, even in the festive month: Given a very Rakesh Gangwal has a history of
weaker base of Q2FY19, yields improved YoY in Q2FY20 for both listed airlines being uncooperative: IndiGo co-
(IndiGo up 8% YoY and SpiceJet up 1.6% YoY). However, they have been weak on founder Rahul Bhatia LINK
absolute terms (Rs3.54/RPKM for SJ & Rs3.52/RPKM for IndiGo) (Exhibit 6&7).
Further, ticket prices have not shown any strong reversal and have continued to be SpiceJet in talks with Boeing to buy
more 737 Max planes: Ajay Singh
weak despite October being a festival season (indicated during the Q2FY20 earnings
LINK
call by IndiGo results notes in plane speak) PLFs across the sector have improved by
c100bps to 84%. Though constraints in capacity (incremental capacity has only been
IndiGo, GoAir get more time to
used to fill Jet Airways) are likely to have pulled down growth, the softness in yields replace engines LINK
can be attributed to some slowdown in demand as well (as widely seen in other
sectors) – growth is still weak at 4% YoY.
Domestic growth to be in single digits as focus shifts to international: Even as Santosh Hiredesai
Analyst - Power, Aviation, Infrastructure
the domestic market has quickly moved to normalcy the international market
+91 22 4227 3450
continues to be short on capacity (Exhibit 8). This has given an opportunity to most
santosh.hiredesai@sbicapsec.com
players to expand their international footprint where incremental capacity is getting
deployed (IndiGo and SJ increase share of International capacity; Exhibit 9&10). Chalasani Teja
ATF prices have cooled off in Oct’19/Nov’19 (down c13% YoY on average) (Exhibit Associate - Power, Aviation
11)but the low improvement in yields especially during the strongest quarter will +91 22 4348 7195
weigh on profits for the sector. chalasani.teja@sbicapsec.com
Domestic volumes (mn)
Month (mn) Oct-18 Nov-18 Dec-18 Jan-19 Feb-19 Mar-19 Apr-19 May-19 Jun-19 Jul-19 Aug-19 Sep-19 Oct-19
Air India group 1.42 1.39 1.54 1.50 1.43 1.49 1.50 1.60 1.52 1.44 1.48 1.45 1.55
Go Air 1.05 1.02 1.11 1.09 1.03 1.15 1.19 1.36 1.33 1.33 1.39 1.33 1.38
Indigo 5.07 5.01 5.48 5.32 4.93 5.44 5.48 5.98 5.78 5.69 5.54 5.56 5.84
Jet Airways 1.56 1.48 1.54 1.48 1.13 0.53 0.09 0.00 0.00 0.00 0.00 0.00 0.00
Jetlite 0.19 0.17 0.21 0.22 0.16 0.13 0.02 0.00 0.00 0.00 0.00 0.00 0.00
Spicejet 1.38 1.45 1.56 1.67 1.56 1.58 1.44 1.80 1.88 1.85 1.83 1.70 2.01
Air Asia 0.64 0.62 0.67 0.67 0.58 0.69 0.68 0.77 0.77 0.77 0.76 0.73 0.80
Vistara 0.43 0.42 0.48 0.47 0.45 0.49 0.52 0.58 0.65 0.71 0.68 0.66 0.67
Others 0.10 0.09 0.10 0.10 0.08 0.05 0.09 0.13 0.11 0.11 0.10 0.11 0.07
Total Domestic pax 11.85 11.65 12.69 12.51 11.35 11.55 11.00 12.21 12.03 11.91 11.79 11.53 12.32
Domestic pax growth (%) 13.8% 11.0% 12.9% 9.1% 5.6% -0.3% -4.5% 3.0% 6.2% 3.0% 3.9% 1.2% 4.0%
Source: DGCA, SSL

SBICAP Research on Bloomberg SBICAP <GO>, www.emis.com Please refer to our disclaimer given at the last page.
Sector Update - Aviation SBICAP Securities Ltd
Exhibit 2: Domestic passenger volume growth and PLF
Monthly YTD
Change Change Change
Oct-19 Oct-18 Sep-19 FY20 FY19
YoY (%) M oM (%) YoY (%)
Dom estic
Indigo
Pax (Nos) 5,842,000 5,074,853 15.1 5,559,031 5.1 39,874,187 33,722,798 18.2
PLF (%) 85.1 83.1 1.994 86.5 (1.4) 87.6 86.7 0.9
SpiceJet
Pax (Nos) 2,005,000 1,382,010 45.1 1,700,367 17.9 12,505,549 9,832,326 27.2
PLF (%) 90.0 90.8 (0.8) 93.0 (3.0) 93.2 93.6 (0.4)
GoAir
Pax (Nos) 1,378,000 1,047,651 31.5 1,326,836 3.9 9,297,351 7,176,686 29.5
PLF (%) 83.1 84.1 (1.0) 86.7 (3.6) 90.4 87.6 2.8
Vistara
Pax (Nos) 669,000 434,761 53.9 664,391 0.7 4,475,147 3,131,580 42.9
PLF (%) 77.9 79.7 (1.8) 80.3 (2.4) 82.9 84.2 (1.3)
Air Asia
Pax (Nos) 803,000 643,358 24.8 725,467 10.7 5,280,605 4,063,728 29.9
PLF (%) 83.0 83.7 (0.7) 84.7 (1.7) 88.1 80.2 7.9
Air India Group & Others
Pax (Nos) 1,619,000 1,511,365 7.1 1,556,908 4.0 11,237,852 10,576,532 6.3
Total dom estic
Pax (Nos) 12,316,000 11,845,000 4.0 11,533,000 6.8 82,774,000 80,848,000 2.4
PLF (Nos)* 84.0 83.0 1.0 85.5 (1.5) 87.3 88.7 (1.4)
Source: DGCA, SSL, * Oct’ 19 industry PLF numbers are taken as an average of all reported in DGCA
Note: YTDPLFs of FY20 are only till Sep nos

Exhibit 3: Oct’19 (YoY/MoM) domestic market share

100%

11.7%
14.7% 16.3%
75% 0.0% 0.0% 14.8%

50% 48.2% 47.4%

42.8%

25%
11.5% 11.2% 8.8%
12.6% 12.6% 11.9%
0%
Sep-19 Oct-19 Oct-18

Air India Go Air Indigo Jet Spicejet Air Asia Vistara

Source: DGCA, SSL

santosh.hiredesai@sbicapsec.com I chalasani.teja@sbicapsec.com November 19, 2019 | 2

Sector Update - Aviation SBICAP Securities Ltd

Exhibit 4: PLFs across airlines Oct’19

95

90

85
(%)

80

75

Jul-19
Jan-19

Jun-19

Aug-19

Sep-19
Oct-18

Nov-18

Dec-18

Mar-19

Apr-19

Oct-19
Feb-19

May-19
PLF - Indigo (%) PLF - Spicejet (%) PLF - Go Air (%)
PLF - Vistara (%) PLF - Air Asia (%)
Source: DGCA, SSL

Exhibit 5: YoY change in PLFs in Oct’19

3
(YoY change in PLFs)

(3)

(6)

IndiGo SJ Industry*

Source: DGCA, SSL, * Oct’19 industry numbers are taken as an average of all reported in DGCA

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Sector Update - Aviation SBICAP Securities Ltd

Exhibit 6: IndiGo yields up 8% in Q2FY20 Exhibit 7: SpiceJet yields up 1.6% YoY in Q2FY20
4.20 4.30

3.90 4.05

(Rs / RPKM)
(Rs / RPKM)

3.60 3.80

3.30 3.55

3.00 3.30
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

FY17 FY18 FY19 FY20 FY17 FY18 FY19 FY20

Source: Company, SSL

Exhibit 8: Domestic and international YoY change in monthly ASKMs

25.0 20.0

20.0 10.0
(YoY growth(%))
(YoY growth(%))

International
15.0 0.0 Jet Airways
Domestic
capacity yet
capacity
to be
10.0 growth has (10.0) replaced by
fallen from
peers hence
highs, which
showing a
5.0 refelects in (20.0) de-growth
softening of
YoY
pax growth
0.0 (30.0)
Sep-17
Nov-16

Nov-17

Nov-18

Sep-16

Sep-18

Sep-19
Mar-17

Mar-18

Mar-19
Jul-17

Jul-18

Jul-19
Jul-17

Jul-18

Jul-19

Jan-18
Jan-17

Jan-18

Sep-18

Jan-19

Nov-16
Jan-17

Nov-17

Nov-18
Jan-19
May-17
Sep-16

Sep-17

Sep-19

May-18

May-19
Mar-17

Mar-18
May-18

Mar-19
May-17

May-19

Source: DGCA, SSL. Note: Oct’19 numbers yet to be reported by DGCA

Exhibit 9: 24% of total capacity of IndiGo is in International Exhibit 10: 28% of the total capacity in International for SJ
100% 100%

75% 75%
71%
72%
75%
76%

76%
76%

77%
77%
77%

77%
77%

78%
78%
79%
76%
77%
79%
81%
81%
81%

81%
81%
81%

82%
83%
85%
86%
86%

50% 50%

25%
25%
29%
28%
25%
24%

24%
24%

23%
23%
23%

23%
23%

22%
22%
21%
24%
23%
21%
19%
19%
19%

19%
19%
19%

18%
17%
Oct-18 15%
Sep-18 14%
Aug-18 14%

0%
0%
Feb-19

Jul-19

Sep-19
Aug-18
Sep-18
Oct-18
Nov-18
Dec-18
Jan-19

Jun-19

Aug-19
Mar-19
Apr-19
May-19
Nov-18
Dec-18

Apr-19

Jul-19
Jan-19

Jun-19

Sep-19
Aug-19
Feb-19
Mar-19

May-19

International Domestic International Domestic

Source: DGCA, SSL, Note: Sep’19 numbers yet to be reported by DGCA

santosh.hiredesai@sbicapsec.com I chalasani.teja@sbicapsec.com November 19, 2019 | 4

Sector Update - Aviation SBICAP Securities Ltd
Exhibit 11: OTP have fallen across airlines in Oct’19

100

90

80
(%)

70

60

50

Feb-19

Jul-19
Jun-19

Aug-19

Sep-19

Oct-19
Oct-18

Nov-18

Dec-18

Jan-19

Mar-19

Apr-19

May-19
Indigo (%) Go Air (%) SpiceJet (%) Vistara (%)

Source: DGCA, SSL

Exhibit 10: Domestic ATF price down by c13% on average during Oct’19 & Nov’19
80,000
FY19 Avg of Rs 68/Ltr

70,000
YTDFY20 Avg of Rs 65/Ltr
(Rs /KLtr)

60,000
FY18 Avg of Rs55.5/Ltr

50,000
FY17 Avg of Rs49.9/Ltr

40,000
Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar

FY17 FY18 FY19 FY20

Source: IOCL,SSL

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Sector Update - Aviation SBICAP Securities Ltd

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The Analysts engaged in preparation of this Report or his/her relative:-
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Name Qualification Designation Sector

Santosh Hiredesai B.E, PGDM Lead Analyst Aviation, Power
Chalasani Teja B.E, MBA Associate Aviation, Power

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Sector Update - Aviation SBICAP Securities Ltd
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