How Indigo, SpiceJet, GoAir benefitted from Jet Airways shutdown; latest data reveals all

The latest May 2019 domestic passenger data shows that, private carriers SpiceJet, Indigo and GoAir have benefited from the shutdown of Jet Airways operations. In May month, the domestic PAX rose by 3%, while market leader  IndiGo grew 23.2%, whereas SpiceJet (SJet) grew 23.6% and Go Air (GO) grew 31%. Interestingly, Ansuman Deb, Research Analyst at ICICI Securities said, “The impact would be even higher in the international segment.” According to Deb,  IndiGo would have higher total growth considering the several new routes it had launched in the international segment. Aggregate passenger load factor (PLF) improved significantly, with IndiGo, SJet and GO reporting 90.9%, 93.3% and 93.9% PLF, respectively, during May. 

At present, the market share of Indigo stands at ~49%; while SpiceJet and Go Air witnessed market share increase to ~14.8%/ 11.1%, respectively.

“Jet market share redistribution to best benefit IndiGo and SJet,” said Deb. 

What can we expect ahead?

Now that first quarter of FY20 is right around the corner, Deb says, “The effect of Jet shut down amidst seasonal strong demand should lead to strong earnings growth for IndiGo (combined effect of 30% capacity growth and 5% organic yield growth and additional systemic fare growth). The fare growth of Q4FY17 was 17% for IndiGo. With April and May being better than March, the fare momentum is expected to continue. SJet had limited window to sell the capacity received through Jet planes which should lead to limited fare growth.”

While overall FY20 outlook is still in favor of Jet Airways rivals, but the challenge would be in airfares which has spiked since past few months. 

In Deb’s view,  lower traffic growth in May is largely on account of lower capacity as Jet was finally grounded by the end of the month. Additionally, full ramp-up of sales of Jet tickets, which moved to SJet fleet, would take some time. Also, there would be significant increase in passenger growth of SJet in coming months driven by proper utilisation of the airplanes inducted from Jet. The big jump in capacity and traffic would happen in Q2FY20. However, considering it is a weak season, the fare growth might be a challenge. 

Overall, Deb highlighted, there could be only 7% and 14% aggregate domestic capacity growth for FY20 and FY21, respectively, for Indian airlines measured in terms of Available Seat Kilometers (ASK). This is based on certain assumptions in-line with the current situation. The assumptions are: (1) No MAX operations in FY20, (2) no resumption of Jet Airways, (3) only partial induction of Jet fleet (30 aircraft) into SpiceJet and (4) no additional aircraft intake by IndiGo apart from the current orderbook-driven induction of A320/321 neo fleet.