IndiGo Airlines is soaring high, both literally and figuratively, as it marks significant milestones even amid regulatory challenges. The airline's parent company, InterGlobe Aviation, reported its share price recently reached Rs 4,736.30, reflecting public confidence following record-breaking passenger numbers. This spike showcased the growing demand for air travel within India.
On Thursday, IndiGo saw its stock rise by 2.77 percent, which has been part of a broader trend over the previous three trading sessions where the stock jumped approximately 8.86 percent. This upswing aligns with the Directorate General of Civil Aviation's (DGCA) announcement indicating November 2024 as the highest traffic month ever recorded for Indian domestic aviation. Notably, IndiGo achieved the remarkable feat of transporting over 10 million passengers within this timeframe, surpassing even its past records.
To break down these impressive numbers, out of the 10 million passengers carried, 9.07 million were domestic travelers. This achievement marks IndiGo's highest number since the airline's inception 18 years ago, surpassing its previous domestic count of 8.64 million from October 2024 and 8.52 million from December 2023. Analysts are optimistic as December 2024 is projected to set new records.
This surge has been met with financial backing; Elara Capital recently upgraded IndiGo's stock from 'sell' to 'buy,' emphasizing the stock's potential upside from its new target price of Rs 5,309, up from Rs 3,847. Gagan Dixit of Elara noted, “We raise FY25E/26E/27E earnings per share estimates by 2 percent/27 percent/15 percent” as the advantages from capacity expansions at major airports coupled with the return of the Pratt & Whitney fleet signal strong growth potential. The report forecasts continued robustness, provided key risk factors, such as rising crude oil prices exceeding $90 per barrel, don’t become issues.
These developments occur against the backdrop of systemic challenges facing the industry, particularly related to regulatory compliance. Recently, the Bureau of Immigration imposed fines totaling Rs 2 lakh on InterGlobe Aviation due to visa-related violations linked to two of its passengers. Despite considering appealing this ruling, IndiGo's management conveyed through regulatory filings their assessment indicating no significant ramifications on the company's financials or operations.
While the fines have garnered attention, they do not obscure the positive outlook for IndiGo as it navigates growth challenges. With current utilization rates at top airports hitting 90 percent, AAI data underlines the urgent need for future airport infrastructure to accommodate projections of 12 percent demand growth over the next few years. Analysts estimate at least 12 additional airports handling over 10 million passengers each will be necessary to meet sustained demand growth, underpinning the need for development similar to what's seen internationally, particularly when compared to China's expansive airport capacity.
The recent surge is also bolstered by substantial orders for aircraft, helping major carriers manage fleet retirements effectively. IndiGo's strategic positioning places it favorably within these parameters. The airline anticipates reducing its 'Aircraft on Ground' from the current high-60s to the mid-40s by early 2026, enhancing operational efficiency and market capture.
Further enhancing this opportunity for the airline is the limited aggressive capacity expansion currently faced by competitors like Air India, as disruptions at Boeing’s facility have capped aircraft deliveries considerably. Such circumstances have opened doors for IndiGo to strengthen its market share effectively.
Given these circumstances, it’s interesting to examine predictions concerning international traffic, which is set to grow at 14 percent, propelled by the demand for shorter flights as the air travel market emerges from the pandemic state. The public’s continued reliance on aviation as opposed to long-haul rail travel bodes well for companies like IndiGo, with the potential for doubled aviation demand.
Analyst recommendations reflect this optimistic outlook, particularly with IndiGo’s parent stock seeing significant percentage growth over the past year. Prabhudas Lilladher’s Parekh suggests buying stock at Rs 4,612 with good prospects of reaching Rs 4,800. The rising Relative Strength Index stands as evidence of upcoming fluctuations, showing confidence among investors. Overall, the airline industry is positioned for dynamic changes, with IndiGo Airlines leading the charge amid regulatory blips.
