Aviation sector is set to have the best year growth wise; here's how

The aviation sector is set to have the best year (FY24) in terms of overall growth (revenue+passenger count) on the back of a rising total number of passengers and multiple other reasons. According to Zee Business research, the total passenger figures from April to September this year crossed pre-COVID-19 levels and reached 18.327 crore passengers against 17 crore passengers in FY20. It is to be noted that India has the third-largest domestic aviation market in the world.

Further, the sector benefited from record travel in the summer. Elara Capital, in a report, estimated 20 per cent year-on-year (YoY) demand growth for FY24, attributing the increase to a reduction in airfares, a fall in air turbine fuel (ATF) prices, and the capacity increase by carriers to fill the gap created by Go First's grounding.

The report further stated that H1FY24 YoY demand growth had already exceeded expectations of 21 per cent YoY. The brokerage firm reiterated that FY24 may report strong earnings for the sector, led by airfare discipline, aircraft and engine supply issues with original equipment manufacturers (OEMs), grounding of the GoFirst fleet, and a strong domestic demand environment.

Zee Business analysts expect the current growth rate to continue in the winter starting October 29, where 8 per cent more departures per week are scheduled this year as compared to last year. 

Elara Capital has reiterated a 'buy' rating on IndiGo, given its deriving benefits from continued aircraft delivery based on the previous order book, strong balance sheet, favourable demand growth environment, and a ramp-up in international traffic.

The brokerage expects that SpiceJet's passenger volume in Q2 FY24 would decline 17 per cent quarter-on-quarter (QoQ) and 27 per cent year-on-year (YoY) on account of a dip in the airline's fleet size.

Domestic market share (September 2023)

IndiGo, SpiceJet share price history 

In 2023 so far, shares of InterGlobe Aviation (IndiGo), the parent company of IndiGo, have gained over 19 per cent, on the other hand, shares of SpiceJet have lost over 8 per cent year to date against the headline index's rise of over 4 per cent. 

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