Grounding of flights may dent Indigo’s market share
MUMBAI/NEW DELHI: The aviation regulator’s decision to ground eight more A320neo aircraft operated by Indigo, which was forced to cancel many flights on Tuesday, has raised concerns that the market share of India’s top airline by passengers flown may be eroded.
The grounding of the planes by the Directorate General of Civil Aviation (DGCA), which also prohibited Goair from flying three of the planes on Monday evening, followed glitches in engines manufactured by Pratt & Whitney, which said in a statement that it can mitigate the issue only by the end of the second quarter. Analysts said Indigo could lose market share as a result.
“Pratt and Whitney engine issues will take a while to get resolved,” analysts at brokerage Edelweiss Financial Services Ltd wrote in a research note on Tuesday, recommending selling the stock. “This will hurt Indigo in the near term and (it) may lose market share to domestic peers.”
India’s largest carrier Indigo carried 4.56 million passengers in January, according to government data, accounting for 39.7% of the total market share among domestic airlines. Goair carried 1.1 million passengers during the same period and had a market share of 9.6%. The total number of domestic travellers during January was 11.47 million passengers.
HDFC Securities Ltd analyst Vishal Rampuria said the grounding had led to about 2% of supply going out of the market. He expects supply to remain weak for a couple of months.
To be sure, the 11 aircraft grounded on Monday and three Indigo planes earlier, account for only 3% of the total fleet maintained by domestic airlines, said rating company Icra’s vicepresident of corporate ratings Kinjal Shah.