Business Companies 28 Jun 2019 Jet Airway’s m ...

Jet Airway’s misfortune seems a boon for rivals

DECCAN CHRONICLE. | ASHWIN J PUNNEN
Published Jun 28, 2019, 1:51 am IST
Updated Jun 28, 2019, 1:51 am IST
For the quarter Q4FY19, airlines saw an increase in yields coupled with a stark increase in their capacities.
All the new aircrafts inducted by Indigo will be A320-neo; which will be 10-15 per cent more fuel efficient than its predecessors.
 All the new aircrafts inducted by Indigo will be A320-neo; which will be 10-15 per cent more fuel efficient than its predecessors.

Mumbai: Lenders of Jet Airways may have badly hit by the grounding of the country's oldest private sector airline, but its misfortune has turned out to be a boon for the airline's competitors like SpiceJet and InterGlobe Aviation.

In the December-March quarter of FY19, both Indigo and SpiceJet reported strong top line growth on the back of robust growth in Revenue Passenger Kilometres (RPKM) over same quarter last year and an increase in their yields.

 

For the quarter Q4FY19, airlines saw an increase in yields coupled with a stark increase in their capacities.

Indigo is still flooding the domestic market as well as the international market with capacity and is guiding for a 30 per cent growth in capacity over FY20; 50 per cent of which will be led by the international fleet addition.

Similarly, SpiceJet did well for quarter despite of the grounding of B737MAX airplanes; the company offset the grounding of the MAX planes by mounting additional frequencies, inducting JET planes on wet lease and by rationalising & optimising the use of its existing fleet.

 

Indigo is increasing its share in the international market which has a travel time of less than 6 hours (UAE, some routes in China) which have higher yields according to the management.

All the new aircrafts inducted by Indigo will be A320-neo; which will be 10-15 per cent more fuel efficient than its predecessors. As of 31st March 2019, Indigo has a fleet of 217 aircrafts out of which 130 are A320ceos, 71 are A320noes, 15 are ATRs and one is an A321neo.

Spicejet added 25 aircrafts in the month of April & May 2019 with its fleet totalling up to 100 as of May 2019 end. Spicejet plans to add 35 aircrafts in the coming fiscal year and plans to enhance its cargo operations significantly by FY20. As a part of its international expansion strategy Spicejet has also signed a Memorandum of Understanding for interlining & a code share agreement with Emirates.

 

According to Elara Capital, there will be a 5-6 per cent market share gain each for the airlines along with strong margin.

The brokerage firm is reiterating its 'Buy rating' on SpiceJet and an Accumulate rating on Indigo.

The airlines are likely to gain from aviation turbine fuel (ATF) being governed under the Goods & Services Tax (GST) Act.

Airline companies currently spend 30 per cent of cost per available-seat-kilometer (CASK) expense on fuel wherein the tax rate on ATF is at 40 per cent. After ATF comes under the GST purview, the tax rate would climb down to at least 28 per cent.

 

Post GST, most benefits of falling fuel cost will have to be passed on to customers, resulting in an estimated 5 per cent decline in airfare. This would help improve passenger demand growth to 10 per cent YoY from the current 5 per cent YoY.

Indian aviation regulator, directorate general of civil aviation, recently released the latest domestic air traffic data.

India's domestic air passenger traffic in May rose 2.9 per cent year-on-year to 122 lakh passengers. This is the third lowest figure for the calendar year but if compared with data since March, it shows gradual improvement. In March, the passenger traffic grew at 0.1 per cent year-on-year, while in April, the domestic air passenger traffic fell by 4.5 per cent year-on-year, registering a six-year low.

 

IndiGo remains the largest airline with a market share of 49 per cent. SpiceJet attained its highest-ever market share of 14.8 per cent, a sharp jump from its April figure of 13.1 per cent, in sync with the rapid expansion of fleet undertaken by the airline. The airline added one plane every day for three weeks of May and now has over 100 aircraft in its fleet. Air India occupied 13.5 per cent domestic market share. For GoAir, it was again a record figure of 11.1 per cent, its highest ever share. AirAsia remained the fourth largest with 6.3 per cent share, followed by its sister company Vistara at 4.7 per cent share.

 

Passenger load factor is the capacity utilisation of an airline or how empty or full the flights were for a carrier. In May, SpiceJet registered the highest load factor for the 50th month in a row at 93.9 per cent, followed by GoAir at 93.3 per cent. IndiGo's capacity utilisation stood at 90.9 per cent for the month of May.

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