In the past four months, through September 2023–January 2024, InterGlobe Aviation (IndiGo) lost domestic market share from the peak of 63.4 per cent to 60.2 per cent, which mirrored the strong fleet addition by competitors at 26 narrow body aircraft (20 by Air India, three by Vistara and three by Akasa), versus 12 by IndiGo. In contrast, IndiGo strongly gained market share in H1-FY24, from 56.8 per cent in March 2023 to 63.4 per cent in September 2023, due to its leadership in narrow body fleet addition.

Also read: Broker’s call: Grasim Ind (Buy)

Thus, IndiGo was able to capture most of the market share of grounded GoFirst airline as well as declining capacity of SpiceJet (from 45 fleet in March 2023 to 33 in September 2023) during H2FY24. But SpiceJet’s capacity has stabilised at 34 fleet since the past four months and it may add fleet going forward, led by equity fund raising of ₹2,300 crore in phases from Q4-FY24.

Expect FY23-28 domestic passenger traffic CAGR at about 12-15 per cent, driven by: government focus on improving air connectivity beyond tier 1 /2 cities; large order book of domestic carriers – about 350 net deliveries are expected in the next five years; and higher capacity at existing key metro airports.

We retain Reduce, given the anticipated pause in market share growth and potential margin decline in H2FY25.