The fourth quarter (Q4FY24) of the aviation sector is likely to remain dry as Directorate General of Civil Aviation (DGCA) data reveals that the domestic demand in Q4FY24 was up only 2 per cent YoY while domestic capacity fell 1 per cent year-on-year (YoY), which led to a 5 per cent rise in airfare.
Based on DGCA data, the estimated domestic demand to have increased merely by 2 per cent YoY in Q4 from 9 per cent YoY in Q3, versus 18-52 per cent YoY in Q3FY23-Q2FY24. The industry’s passenger load factor (PLF) may be at 89 per cent in Q4FY24E versus 87 per cent in Q3FY24 and 86 per cent in Q4FY23.
According to brokerage firm Elara Capital, InterGlobe Aviation (Indigo) and SpiceJet are likely to report a combined adjusted profit after tax (PAT) of ₹23.4 billion in Q4FY24 versus ₹33.2 billion in Q3FY24 and ₹6.2 billion in Q4FY23.
The firm further highlighted that FY25 may witness muted demand growth in the first half (H1) due to grounding of 75 fleet for Indigo and pilot issues at Vistara. However, it is expected that the domestic market will witness an oversupply in the second half (H2) of FY25 when INDIGO’s 75 grounded aircraft may fly again while the competitors may continue to add fleet around 10% of total domestic capacity.
Indigo
The brokerage firm expected the low-cost airline company to post an adjusted profit of ₹20.6 billion in Q4E versus ₹30.5 billion in Q3FY24 and ₹6.7 billion in Q4FY23.
“We expect passenger volume to improve 2% QoQ and 3% YoY with PLF at 87.2% in Q4FY24E versus 84.2% in Q4FY23,” the firm said in a note.
The brokerage firm maintained its ‘Reduce’ tag on Indigo, given the anticipated pause in market share growth and potential margin dip in H2FY25.
“We are bullish on the Aviation sector in the long-term (from FY26) as we expect FY23-28 domestic passenger traffic CAGR at ~12-15%, led by government focus on improving air connectivity beyond tier 1/2 cities, large order book of domestic carriers (1,606 outstanding order book as on December 2023; ~350 net deliveries expected in the next five years) and higher capacity addition at existing key airports in metros,” it said.
Spicejet
The airline is expected to post an adjusted PAT of ₹2.8 billion in Q4FY24 versus a loss of ₹477 million in Q4FY23, as per Elara Capital report.
“In Q4FY24E, passenger volume may dip 18% YoY and 4% QoQ on account of a decrease in fleet size,” it said.
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Published: 10 Apr 2024, 08:57 PM IST