1

IndiGo Stock Pitch

NSE: BUY at 1046/- INR
 Investment Thesis 2

Indigo’s dominant position in the Indian Aviation Sector,

combined with cost leadership and aggressive expansion, healthy
balance sheet, strong cash flow generation combine to create a
compelling investment that has been undervalued

We believe the time to BUY the stock is when concerns rise the
highest for a market leader with structural cost advantages in an
industry with growth tailwinds for a long period

Target Price: INR 1550/-

Recommendation: Buy Current Price: INR 1046.70/- Time Horizon: March, 2020
(16 months)

Strong Operational Performance Strong Demand Growth

• Demand-Supply scenario is favourable due to delayed
supplies by of A320 Neos and further industry consolidation
• With ticket prices at multi-year lows (CY YTD 17%) demand
translates into better volume growth for the company.
• YTD FY19 demand growth has been running at +16%
resulted in higher load factors and hence better pricing.

Aggressive Expansionary Plans

Indigo has run a profitable even when it sold below Spicejet’s Order Book of 50 ATRs to foray into regional connectivity.
costs while RASK-CASK (Rs) approach reflects operational Delivery to start this December and an order book of 350+
prowess and ability to out-compete peers in long run aircrafts, which are more fuel efficient than the existing Neos.

Source : Euromonitor International, Thomson Reuters, CRISIL Research

Industry Analysis 3
Empirical Attractiveness
Major Trends
Revenues in the industry have grown at a 8-Year CAGR of 14%. RSKM have grown at a 8 Year CAGR of 13% and 5 Year
CAGR of 12%. The industry has increased ASKM capacity at a 10% CAGR. Passenger loading has steadily increased from
69% in 2010 to 84% in 2018.
Revenue Seat Kilometers Industry Revenues (INR millions)
180000 9,00,000
GR
14% CA GR
135000 13% CA
6,75,000

90000 4,50,000

45000 2,25,000

0 0
2010 2011 2012 2013 2014 2015 2016 2017 2018 2010 2011 2012 2013 2014 2015 2016 2017 2018
Indigo Spicejet Jet Airways Air India Indigo Spice Jet Jet Airways Air India
Available Seat Kilometers Loading
250000 100%

GR 75%
10% CA
200000

150000 50%

100000 25%

50000 0%
2010 2011 2012 2013 2014 2015 2016 2017 2018
0
2010 2011 2012 2013 2014 2015 2016 2017 2018 Indigo Spicejet Jet Airways Air India Total

Source : Euromonitor International, Bloomberg, CRISIL Research, World Bank

Industry Analysis 4
Empirical Attractiveness
Major Trends
RASK has grown at a 3% CAGR whereas CASK has reduced at a 2% CAGR from 2010-18. Overall CASK
for the industry continues to exceed RASK. Indigo is the only carrier to have maintained a positive margin
throughout 2010-18.
Revenue per ASK - RASK (INR/km) Cost per ASK - CASK (INR/km)
6.00 10.00

4.34 4.28 4.09

4.50 3.91 4.02 7.50 6.08
3.71 5.75 5.77 5.71
3.27 3.30 3.45 5.24 5.12 5.15
4.67 4.81
3.00 5.00

1.50 2.50

0.00 0.00
2010 2011 2012 2013 2014 2015 2016 2017 2018 2010 2011 2012 2013 2014 2015 2016 2017 2018

Indigo Spicejet Jet Airways Air India Total Indigo Spicejet Jet Airways Air India Total

RASK - CASK
1.50

0.00
2010 2011 2012 2013 2014 2015 2016 2017 2018
-1.50 -0.87 -0.64 -0.72
-1.41 -1.38
-3.00 -1.94 -2.17
-2.48 -2.32

-4.50

Indigo Spicejet Jet Airways Air India Total

Source : Euromonitor International, Bloomberg, CRISIL Research, World Bank

Industry Analysis 5
Empirical Attractiveness
Major Trends

Industry 5 Year Average ROCE ranges from 21% for Indigo to -2% for Air India. ROCE shows a high
coefficient of variation indicating the high degree of variability in the industry. 5 Year Average EBITDAR
margins stand at 16% with a coefficient of variation of 43%. Margins have improved over time. The industry
shows a highly cyclical behaviour.

ROCE 2010 2011 2012 2013 2014 2015 2016 2017 2018 5Y Average CV
Indigo 35% -1% 29% 6% 25% 35% 19% 20% 21% 63%
Spicejet 3% 10% -56% -8% -49% -81% 82% 60% 38% 10% 540%
Jet Airways 1% 3% -3% 0% -18% -9% 18% 13% -14% -2% 610%
Air India -6% -7% -9% -7% -7% -4% 1% -2% 0% -2% 144%

EBITDAR Margin 2010 2011 2012 2013 2014 2015 2016 2017 2018
Indigo 31% 30% 16% 32% 28% 28% 36% 29% 29%
Spicejet 27% 25% 8% 19% 12% 12% 34% 33% 32%
Jet Airways 23% 30% 19% 17% 10% 14% 27% 22% 16%
Air India -19% -8% -12% -17% -6% -4% 7% 18% 0%
Total 6% 14% 7% 9% 8% 11% 23% 23% 16%
5Y Average 16% 16%
CV 43%

Source : Euromonitor International, Bloomberg, CRISIL Research, World Bank

Industry Analysis 6
Winners & Losers
Major Trends

Indigo has been consolidating its domestic market share aggressively over the years growing it from 12.5% in
2009 to 41.0% in 2018. Indigo, Spicejet, Vistara, GoAir have increased market share whereas Air India and Jet
Airways have lost market share over the same period.

Domestic Market

International Market

Source : Euromonitor International, Bloomberg, CRISIL Research, World Bank

 Industry Analysis 7
Structural Attractiveness

Threat of New Entrants is extremely Low due to Industry Structure.

High Congestion at Prime locations makes it extremely difficult for
new entrant to obtain a good slot. Further procurement of Air Craft
takes considerable amount of time and large sum of investment.
New Entrants

Threat of Substitute is Medium as due to high price sensitivity of

Indian customer. Further poor connectivity offered by Airlines to a
large majority of cities in India due to absence of airports. We expect
this to reduce in future due to government initiatives like UDAN
Substitute

Competition in the Industry is extremely high. There have been

several instances where industry profitability has been impacted by
price war. Thus overall competition is extremely High.
Competition

Source : Indigo, Jet Airways, Spice Jet Annual Report

 Industry Analysis 8
Structural Attractiveness

Airline Industry consists of two types of Buyers - Individual Flyers as

well as Online Travel Portals. For Individual flyer there is extremely
low switching cost & almost no sense of brand loyalty. For Online
Portals as there is no clear winner bargaining power is lower. Thus
Customer overall Industry has High Bargaining Power

For Aircraft Manufacturer bargaining power is High as manufacturing

is dominated by Boeing & Airbus. However in terms of raw material
“Crude” bargaining power of supplier is extremely low as it is a
Suppliers commodity. Thus overall bargaining power of supplier are Medium

Overall we conclude that structurally the Airline industry has Medium to Low attractiveness

Source : Indigo, Jet Airways, Spice Jet Annual Report

 Current & Future Prospects of Industry 9

Increased Focus of Government of Aviation Crude Oil

UDAN Initiative • Historically
BOM-CHE
• This scheme has led to Development of lot of Airports in tier 2 • Crude Oil are one of the Major component of operation cost in
and Tier 3 cities of India leading to huge growth prospect in Airline Industry
the future • Over the past years due to highly fluctuating crude prices
• This is also expected to bring significant increase in revenues profitability of the Industry has shown a lot of volatility as
from Cargo Business due to network expansion on domestic explained previously
front
• Future
BOM-CHE Prospect
Civil Aviation Policy 2015
• EIA expects volatility in the Crude Oil market to reduce in
• Development of low-cost /no-frills airport to reduce the fixed
upcoming years due to ramp up of Shale Oil production in
cost in airline Industry along with development of old under
United Sates
utilized airstrips
• It is also expected that in upcoming years there be a
• Encouraging Maintenance, Repair & Overhaul sector in India
significant efforts from Major career to pass on the increased
by formulating favorable taxation policies
cost to customer. Historically such attempts have not vastly
impacted the load factor of a carrier
Promoting Investments
• Airline Industry is expected to receive $16 Billion worth of $106.08
$113.56
$120.00
investment over the next five years $92.82
$100.00 $85.70
• 5/20 rule has been relaxed leading to easier penetration in the $72.00 $71.00
international market for domestic carries $80.00
• High taxes on ATF need to be relaxed. Domestic carries on $60.00
average pay 65% more taxes on ATF as compares to $40.00
international carries. $20.00
• Attempts by government to Increase FDI in the sector is also $-
expected to bring significant capital in future 2018 2019 2020 2021 2022 2023
Crude oil price forecast

Source : EIA Annual Energy Outlook, IBEF

 Current & Future Prospects of Industry 10

Price Comparison Low Cost Carriers

Air Travel Rail Travel • Over the past years LCC (Low Cost Carrier) has
Route become a focused strategy for most of the Airlines in
Time Cost Time Cost* India
DEL-BOM 2 hr. 2500 16 hr. 2200 • Strategy requires a tremendous amount of operational
efficiency in terms of faster turn around time & lower
DEL-BLR 2.7 hr. 3000 36 hr. 3000 running cost to increase the operating margin
BLR-BOM 1.5 hr. 2300 23 hr. 2000 • FSC (Full Service Carriers) with significant higher cost
DEL-KOL 2.25 hr. 2800 16 hr. 2300 and relatively lower fare difference will find it extremely
difficult to complete with these Airlines in near future
BOM – GOA 1 hr. 2000 11 hr. 1500
AMD-BOM 1.25 hr. 1200 7 hr. 1100 MARKET SHARE
DEL-HYD 1.5 hr. 2600 20 hr. 2500 Low Cost Carrier Full Service Carrier

BOM-CHEN 2 hr. 2000 23 hr. 2000

DEL-CHEN 3 hr. 3500 13 hr. 2800 39.20% 36.60% 37.80% 36.70%
54.40% 50.20%
BOM-HYD 1.5 hr. 1400 15 hr. 1400
*For railways price has been taken for AC 2 tier ticket

60.80% 63.40% 62.20% 63.30%

45.60% 49.80%
Over Past 6 years Air Travel has been posting a CAGR of
Around 12% compared to only 4% CAGR of Railways
2011 2012 2013 2014 2015 2016

Source : IndiaNivesh Institutional Research, HDFC Securities

 Business Quality (1/4) 11
ROTCE, Margin Stability, and Growth

Overview of IndiGo

⎻ Global business player of passenger airline services, ground management, air transportation, terminal maintenance etc.
⎻ 10 consecutive years of Profitable operations; has one of the lowest CASK (~INR 3 per ASK) in the world
⎻ Market share of 41.3% as of June’18, ~1000 daily flights
⎻ Asset light model (Sale & Lease Back) and younger fleet: Fleet of 173 aircraft including 39 new generation A320 NEOs and 10 ATRs
⎻ 20% YoY increase in traffic, compared to 16.4% in capacity, resulting in record PLF of 87.4% for FY18

ROTCE & Margins stability

Year 2011 2012 2013 2014 2015 2016 2017 2018 Remarks
ROTCE 41.2% 42.2% 9.7% 36.8% 19.3% 42.3% 53.2% 34.7% Significantly above cost of capital

EBITDA Fairly constant in double digit except

16.2% 3.4% 12.5% 7.4% 16.5% 22.8% 16.2% 17.3%
Margins twice in last seven years

Growth
Revenue growing at 29.2% CAGR EBITDA growing at 30.3% CAGR
250.0
230.2 50.0
200.0 40.0
185.8
161.4
150.0 139.3 30.0
111.2 20.0
100.0 92.0

50.0 55.6 10.0

38.3
0.0
0.0
2010 2012 2014 2016 2018 2020
2010 2012 2014 2016 2018 2020

Source : Bloomberg, CapitaLine

 Business Quality (2/4) 12
Defensibility

Low Cost Operations Regulatory Barriers

• Lowest CASK • New airlines face considerable barrier in getting a gate at
a major airport
• Fuel efficient fleet of airlines (frequently upgraded with
new technology) • Government deregulation poses moderate threat
• Only one kind of airline (A320) model used to Defensibility - Medium
• minimize cost of operation
• basic pilot certification àlowering the salary cost Customer Captivity
• Standardized offerings (e.g. economy class, less variety • Low switching cost for customers
in the in-flight menu, hence lower cleaning cost)
• Innovations in operations – focus on high TAT (usage of • No supportive middlemen; no long-term contracts; no
ramps at airports to allow quick passage of disabled loyalty programs
customers) • Assumed switching costs due to exclusive presence on
• Bulk ordering of aircraft – deal negotiated at favourable many routes
terms Defensibility - Low
• Economies of scale
Defensibility - High Intangibles
• Brand recall is very high, with the resounding ‘On Time’
Network Effects motto
• Negligible direct network effects • Network economies of scale – largest airlines network
• Negligible indirect network effects facilitates nonpareil access
Defensibility - Low Defensibility - Medium

Moderate moat due to low structural cost supported by continuous process innovations
Defensibility: High Moderate Low

Source : Bloomberg, IndiGo Annual Report

 Business Quality (3/4) 13
Cyclicality, Cash Generation, Other Business Risks, Rate of Change

2. Cyclicality 4. Other Business Risks

• Moderate Cyclicality business High Increase in fuel prices (plus INR depreciation)

• Demand for air travel highly correlated with business High Rising competition (price war) exerting pressure on
cycle - business travel & leisure travel get adversely hit profitability
during the economic downturn Low Inability of the government to deliver infrastructure
• The cyclicality of Indian airlines industry also linked to project on time to support sustained growth
commodity price cycle. Margins get affected due to
Low Delay in the delivery of the A320s
fluctuations in the oil prices which is linked with the
supply/demand dynamics of crude oil Low Grounding of aircrafts
• Commodity cycle may or may not coincide with the business
Low Corporate governance risks
cycle

3. Cash Generation 5. Rate of Change

• Indigo converted ~100% EBITDA into OCF since 2015
• It also converted 100+% of net profit into free cashflow
• Higher cash conversion ratio due to increased forward
sales amount (deferred revenue) – working capital of the
business is decreasing
• Low volatility in OCF/EBITDA ratios on yearly basis
• Very low rate of change in airlines industry
• Since 1925, the demand has picked up and has been steady
in the last 3-4 decades with air travel becoming an important
mode of transportation.
• No rapid changes in consumer taste and preference
observed - Rather air travel is becoming the lifeline of the
economy
• No rapid technological change - the disruption is slow in
this sector and the technological improvements are
integrated into current operations in the upstream of the
value chain

Source : Euromonitor International, Bloomberg, CRISIL Research

Business Quality (4/4)
Management Quality
Management has strong track record…
Integrity
• Management has been observed, to be honest, and frank about
discussing threats and risks in the MDA e.g. discussed their
inability in past to strengthen the organization in proportion to the
growth
Competence
• The firm has delivered significantly higher returns for the past
decade and has grown to emerge as an undisputed market
leader..
• Stable leadership, majority of the top members stayed with the
company since 2006, except recent changes in CEO & COO
• Employees are positive about managements (based on the
171 reviews on the Glass-door)
Capital Allocation
• The firm has efficiently deployed capital for the past decade by
growing into new routes and increasing frequency on existing
routes.
Alignment
• ESOPs for incentivizing long term performance and huge bonus for
appreciating short term performance
Pros: “On-time salary”, “good friends”, “support
from HR”, “enthusiastic people”
Cons: “unusual working hours”, “hard work”
14
Promoters
Rahul Bhatia: Interim CEO, Promoter NE Director,
• Founder of Inter Globe Aviation and an electrical
engineer; 25 years of experience in travel industry
• 20th richest person in India by Forbes, 17th Most
Powerful Person of 2017 as per India Today & EY
Entrepreneur of the Year awardee
Rakesh Gangwal: Non-Executive, Promoter Director
• CEO of US Airways Group ,30 years of
experience in aviation industry; Co-founder of
Inter globe aviation Ltd
• Mechanical Engineering from IIT BHU and
MBA from XLRI Jamshedpur; Distinguished
alumnus award of IIT Kanpur
Wolfgang Prock-Schauer: : COO
• 36 years experience in senior leadership
positions in Aviation industry across Wrold e.g.
Austrian Airlines, Jet Airways (India), British
Midland International, Air Berlin (Germany/ UK)
and Go Air (India)
Rohit Philips: Chief Financial Officer
• 17 years experience in United Airlines as
Senior Vice President, Corporate Strategy &
Business Development.
• MBA from Cornell University, BA
(Mathematics) St. Xaviers
Overall positive reviews of the employees – proactive HR, focus
on learning for the employees, enthusiastic people who like
challenges. The only major concern was working hours and hard
work. A pool of talented & challenge-seeking employees helps
Indigo to maintain low structural costs and its dominance.
 Business Quality 15
Other Research
Cancellation Rate in Sept 2018 Complaints registered in Sept 2018
- Overall Cancellation rate domestic airlines has been - Overall #complaints per 10k pax for Indigo was 0.3 as
1.07% compared to 0.59 for the industry.
- Indigo: The cancellation rate was only 0.23% in the - Hassle free service delivery
same period.

Interest Over Time

- Indigo has maintained a consistent lead over all other

players for a very long time in terms of search interest
on Google
- Search keywords – a proxy for the real demand
- This lead is going to dominate at least in the short term
time frame (1-2 years)

Source : Directorate General of Civil Aviation Report, Google Trends

 Financial Analysis & Other Red Flags 16

Resignation of CEO of the company : Reasons for resignation of CEO

not very clear. Sources specified he wanted to start his own venture.
Recently joined OYO as part of the management body (CEO)
Corporate
Governance

Other sources of income : Compensation received form P&W on

grounding of airplanes not disclosed.

Leasing : Enough information about operational & financial leases

not provided. Revenue from sale & leaseback transactions not
disclosed separately. Arriving at the correct capital structure of
the company becomes an issue due to the presence of leases
Accounting
Issues Large amount of cash balance & investments : Company holds
large amounts of cash balance & investments. Company plans to
move to an ownership model from leasing model and hence
might be saving up.

Source : Directorate General of Civil Aviation Report, Google Trends

 Valuation: Inter Firm Comparison (1/3) 17

Operational & Financial Metrics

EV/ CASK CASK ex Yield

Market Value EV PLF (%)
Company CMP (INR) EBIDTAR (Trailing (INR) Fuel (INR) (INR)
(INR Bn.) (INR Bn.)
12 Mn.)

Indigo 1046.1 386.9 593.6 9.0 3.1 1.9 3.6 87.0%

Spice Jet 81.45 63.8 155.4 8.7 3.7 2.5 4.0 93.6%
Jet Airways 341.4 35.6 302.7 11.9 4.6 3.0 4.5 83.6%
Mean - 162.1 350.6 9.9 3.8 2.5 4.0 88.1%
Median - 63.8 302.7 9.0 3.7 2.5 4.0 87.0%
High - 386.9 593.6 11.9 4.6 3.0 4.5 93.6%
Low - 35.6 155.4 8.7 3.1 1.9 3.6 83.6%
EBITDAR and margins; Indigo’s metrics have been much less volatile than peers

Source : Company Reports, Mint Research, Economic Times

 Valuation: P/E Ratio (2/3) 18

Using P/E Ratio captures Indigo’s advantages of lower leasing costs and better balance sheet vs its peer group and
captures long-term profit generation potential.
Unit Economics
No. Per ASKM FY15 FY16 FY17 FY18 FY19E FY20E
1 RASK 3.94 3.77 3.4 3.63 3.81 3.81
Assumptions
RRPK 4.94 4.49 4.01 4.15 4.32 4.32
Yield 4.36 3.91 3.5 3.59 3.77 3.77
• Forecast capacity (ASKM) growth of 25%
RASK less Fuel cost 2.31 2.65 2.24 2.4 2.42 2.5
2 CASK 3.42 3.11 3.02 3.13 3.38 3.33 over FY19/20
3 RASK-CASK (1-2) 0.52 0.66 0.39 0.49 0.43 0.47
• Fixed cost (CASK ex fuel) growth of 4% in
YoY change (%) NA 26.9% -40.9% 25.6% -12.2% 9.3%
Fuel Cost/ASK 1.63 1.12 1.16 1.22 1.39 1.3 FY19, FY20
CASK ex fuel 1.79 1.99 1.85 1.91 1.99 2.03
4 EBITDAR/ ASK 1.08 1.31 0.96 1.03 1 1.03
• Model spreads (RASK-CASK) normalizing
YoY change (%) NA 21.3% -26.7% 7.3% -2.9% 3.0% down to 0.43 in FY19, 0.47 by FY20.
5 EBITDA/ ASK 0.53 0.73 0.39 0.47 0.43 0.48
6 PAT/ ASK 0.37 0.46 0.3 0.35 0.31 0.33
YoY change (%) NA 24.3% -34.8% 16.7% -11.4% 6.5%
Average fleet size (# Aircraft) 86 101 119 145 187 242 Results
Fleet size (# Aircraft) 94 107 131 159 214 269
7 ASK (MM) 35,327 42,826 54,580 63,500 79,375 99,219
Y/Y 18% 21% 27% 16% 25% 25% • Overall profit/ASK 0.33/Km by FY20
8 RPK (MM) 28,177 35,968 46,290 55,500 69,930 87,413 • In contrast to the FY15-18 average spread
YoY change (%) NA 27.7% 28.7% 19.9% 26.0% 25.0%
9 Load factor 80% 84% 85% 87% 88% 88%
generated of 0.52x (FY18E: 0.5x), a 0.46x is
10 PAT (MM) (6*7) 13,071 19,700 16,374 22,225 24,606 32,742 used as a normalized spread
11 EPS (INR 38.0 54.7 45.3 57.8 64.0 85.2 • An 18x P/E multiple
YoY change (%) NA 43.9% -17.1% 27.6% 10.7% 33.1%
PE Multiple 18x
12 Fair Value 1533.2

Source : Company Reports, Mint Research, Economic Times

 Valuation: DCF & EV / EBITDAR Ratio (3/3) 19

Cost of capital assumptions

Reasons for the following valuation:
Cost of debt 10.3%
• Tough to predict capex as it is not uniform and sporadic based on
Tax rate 30.0%
when the company decides to acquire new aircrafts
Debt as % of total capital structure 52.9% • This is only pertaining to IndiGo since its FY20 Capex prediction is
highly uncertain; industry-wide DCF is still applicable
Risk free rate 6.8%
Beta 0.97 Assumptions
Market risk premium 5.3%
Equity as % of total capital structure 47.1% • Revenues, lease rentals & fuel expenses have grown in
proportion to the ASKm guidance given by the management.
Weighted average cost of capital (WACC) 9.4% • Other expenses kept in line with revenue

Valuation • Capex addition taken on the basis of Capex / ASK (historical

basis)
Perpetuity Exit EBITDAR
• The investment horizon is as on 31st March, 2020
Enterprise value 5,50,573 10,51,608 • EV/EBITDAR Multiple of 9x has been taken to w.r.t the
Net debt (6,121) 3,70,433 historical mean for the Company, a 10% premium over global
Equity value 5,56,694 6,81,175 industry average

Equity value per share 1,542 1,525 • Lease Rentals have been capitalized by 7x
• Capital structure based on the data obtained from bloomberg
% premium / (discount) over market share price 47% 46%

Source : Company Reports, Mint Research, Economic Times

 Valuation: Sensitivity Analysis 20

Scenario Operational Changes Value

Best Case Aircraft fuel expense to decline by upto 20% 1900/-

Other operational expense to decline by upto
10%

Base Case Aircraft fuel expense to remain range bound 1550/-

Other operational expense to remain in a similar
range

Worst Case Aircraft fuel expense to increase by upto 20% 880/-

Other operational expense to increase upto 10%
ASKs to reduce by upto 15%

Sensitivity analysis
Equity value per share (growth rate vs WACC) Equity value per share (exit multiple vs WACC)
1,542.09 11% 12% 13% 1,524.65 11% 12% 13%
3% 1,029.55 898.81 795.27 8.0x 1,221.07 1,195.42 1,170.53
4% 1,158.44 995.32 869.63 10.0x 1,726.72 1,690.45 1,655.25
5% 1,330.29 1,119.41 962.57 12.0x 2,232.37 2,185.47 2,139.97
6% 1,570.88 1,284.85 1,082.07 14.0x 2,738.02 2,680.50 2,624.69

Source : Company Reports, Mint Research, Economic Times

Catalysts and Risks
Catalysts
Relative cost advantage - Indigo’s CASK (Rs) rises slower YoY
than peers in an environment of rising cost
• Cost leadership – One of the lowest CASK in the
world
• Market share of 41% - A preferred choice for
frequent travellers
• Focus on operational reliability and industry
leading on-time performance
• Satisfactory dividend yield in terms of payout ratio,
healthy and relatively debt light balance sheet
combined with an asset light model
Source : Company Reports, Mint Research, Economic Times
21
Risks
Oil prices expected to remain range bound, narrowing gap
between airfares and other modes of transport.
• Further increase in the fuel prices/ depreciation of
INR posing risk to margins
• Rise of credible competition and consequent price
war in the industry amongst the LCCs
• Further delay in delivery of the A320s, non-resolution
of issue with the engine of existing flights
• Inability of the government to create infrastructure
for rising volumes