• 22,528
• 21
• 99

IndiGo can expand profitably, sustain its earnings growth

IndiGo’s focus on capacity addition has enabled it to control about half of India’s aviation market while underscoring the ability of the country’s biggest airline to fill seats without sacrificing yields.
That pace of capacity expansion will likely continue. According to the management, IndiGoNSE -0.28 % will add 30 per cent incremental capacity in FY20, which is likely to take its aircraft count to 282 by the end of the fiscal.
For the past two years, the airline has been aggressively adding capacity. In the past five months, the airline has gained 7-8 per cent market share, now controlling about 50 per cent of India’s aviation industry. The gains have come even when IndiGo’s yields in the March quarter climbed 12 per cent, reflecting its ability to expand profitably.
Also, IndiGo plans to add incremental capacity of 30 per cent in FY20 must be seen in the context of crude oil price movements and the airline’s international operations. On incremental capacity addition and a stable market share of close to 50 per cent, IndiGo is on a strong earnings growth path. Bloomberg’s estimates showed its EPS in FY20 is expected to be ₹73.2, about 18 times higher on year.