Indigo IC Elevar

Gagan Dixit | gagan.dixit@elaracapital.
com | +91 22 6164 8504

Harshraj Aggarwal | harshraj.aggarwal@elaracapital.com | +91 22 6164 8530 August 2017
Warren Buffet Annual Letters
1989: “we have no ability to forecast the economics of the airline industry”
2007: “The worst sort of business is one that grows rapidly, requires significant capital to engender the
growth, and then earns little or no money. Think airlines.”
Los Angles Times, March 2017

“Buffett has invested nearly $10 billion through his holding company Berkshire Hathaway in United, American,
Delta and Southwest airlines in the last few months”
WealthPark Academy
"Investing is continuous learning. What was true in the past is not true today. What is true today may not be
true tomorrow”
Elara Securities (India) Private Limited Aviation : India Will Fly 2

Table of Content
India Will Fly…………………………………………………………………………………… 4
A Snapshot: Domestic Airline Industry at Dawn of Golden Age…………….. 5
Domestic Air Travel Demand to Grow at 20% CAGR in FY17-22E…………. 7
Domestic Supply-demand Model Portends Huge Under-capacity…………… 14
Indian Carriers to Witness Strong Load Factor……………………………………. 21
Mumbai Congestion Case Study – A Big Entry Barrier………………………….. 24
Understanding Network Strategy Using Routes Analysis………………………. 28
Company Section
InterGlobe Aviation – Numero Uno Player…………………………………………. 33
Spicejet – Turnaround Maharaja………………………………………………………. 47
Jet Airways – Strategic Fixes Missing………………………………………………… 60
Snapshot of Other Major Domestic Airlines………………………………………… 73

Appendix – I Spicejet Turnaround Story ………………………………………… 78
Appendix – II IndiGo A320neo P&W Engine Issue.…………………………… 80
Appendix – III Air India Privatization Impact……………………………………. 82
Appendix – IV National Civil Aviation Policy, 2016…………………………….. 85
Appendix – V Routes Quartiles………………………………………………………… 88

India Will Fly
The Indian Aviation industry is potentially in its sweetest spot ever Investment ideas
as a strong domestic demand dynamic converges with
Airlines with a strong order book are to capture strong demand growth by
accommodative government policy and a benign fuel outlook. As
timely acquiring peak hours slots at major airports before runway constraints
the industry enters a phase of high utilization and increasing yields,
hit the industry
the cyclical character of the industry is morphing into a structural
opportunity opening up possibilities of sustained returns  InterGlobe Aviation (INDIGO IN, Buy, TP: INR 1737, Upside
43%): IndiGo’s strategy is to focus on growth through higher exposure
 Demand – A secular hue: Domestic traffic growth – a cyclical
in high growth Quartile 2 routes (Top 25%-50% in terms of passenger
phenomenon – is now steady and secular. After clocking 20% CAGR
volume) vs peers, that would also improve its PLF. IndiGo has highest
over FY14-17, it is to post another 20% CAGR in FY17-22E
order book at 411 that would help capture major airports peak hours
 Government policy to spawn new markets and new fliers: The slots. Fuel efficient new A320Neo aircrafts would help control fuel cost
Government intends to make flying affordable and convenient through
 SpiceJet (SJET IN, Buy, TP: INR 170, Upside 33%): SJET
its new policy of UDAN (a regional connectivity scheme which targets
strategy is to attain highest PLF by focusing more on Quartile 3 routes
to achieve new 300mn domestic passengers annually by 2022 and
(Top 50%-75% in terms of passenger volume), characterized by least
500mn by 2027)
competition and thus higher yields. SJET order book at 275 is second
 Yields – No other way but up: We see the industry fleet scenario to highest that would help timely capture the strong demand growth
hit a deficit soon as the capacity addition of 225 planes will lag the through peak hour slots at major airports
need of 317 new fleets during FY17-20E. Demand growth and
 Jet Airways (JETIN IN, Accumulate, TP: INR 610, Upside 7%):
emerging runway constraints will keep the PLF, aircraft utilization and
JETIN is stuck in low growth Quartile 1 routes (Top 25%) with most of
ASKM growth elevated
its capacity, due to its inflexible hub-and-spoke network strategy model
 Bogey of rising fuel prices absent: ATF prices have corrected 40% for international operations. Company’s stretched balance sheet resulted
over FY14-17 and are expected to remain weak on global crude in small order book of new fleets, that would be rationed mostly to
surplus on rising US supplies international sector at the expense of domestic market share

A Snapshot: Domestic airline industry at dawn of golden age
 India air travel penetration is poised to grow at a 18% CAGR to 0.22 trips / capita over FY17-22E, implying 20% domestic
passenger CAGR over FY17-22E.
 Unlike most of the developed and developing nations with large geographical areas (Russia, Canada, US, China, Brazil, Australia and Mexico)
where air travel dominates, India’s domestic travel is dominated by railway due to lower fares (Rail fares were not revised between FY04-14
when energy prices were rallying). However, the railway dominance is dissipating with fall in ATF prices by 40% during FY14-17, increase in
railway fares along-with introduction of dynamic pricing and limited capacity growth at AC coaches.
 Strong air travel demand would be driven by rising disposable income, low crude prices, favourable policy environment and increasing railway
fares with dynamic pricing (less political interference on railway pricing).
 The biggest beneficiary will be Low Cost Carriers (LCCs), which accounts for 65% of the domestic air travel at present, where IndiGo and
SpiceJet would gain the most due to strong/improving balance sheet, healthy order book and cushion of low cost structure. Our analysis on
demand-supply balance status of domestic airline industry using past 25 years data (taking framework from a study by Boeing on global
aviation industry), suggests all major domestic indicators (fleet growth, load factor, aircraft utilization and ASKM growth) are pointing towards
industry at under-capacity. It implies air transport supply growth would lag at least by 5 years to balance growing demand. Thereby,
passenger load factor (PLF) of the industry would increase by 1-2% per annum going forward. We believe next 5 years would be
the golden period for LCCs – IndiGo and SpiceJet, who are most proactive on future fleet capacity addition.
 Our analysis of all 278 domestic routes concludes that IndiGo and SpiceJet would witness 20-22% passenger volume (PAX) CAGR during
FY17-20E, which would be at par or higher than overall domestic industry (CAGR of 20%) due to higher exposure to high growth non-trunk
routes. While Jet Airways PAX growth would be lower (CAGR of 8%) as airline has higher exposure on trunk routes whose growth is impacting
from runway capacity constraints during peak hours at major airports (Mumbai at present and Delhi/Bangaluru in 3 years).

Valuation
EV/EBITDAR EBITDAR CAGR EPS CAGR P/E P/B ROE Net Debt
Companies Mcap
(x) (%) (%) (x) (x) (%) (USD mn)
(USD mn) FY18E FY19E FY17- FY19E FY17- FY19E FY18E FY19E FY18E FY19E FY18E FY19E FY18E FY19E
Indian Carriers
Indigo 7,162 4.7 3.6 36.9 56.3 14.4 10.6 11.2 11.1 79.3 104.9 (427) (576)
Spice Jet 1,234 3.3 2.1 35.0 60.0 9.5 7.6 38.3 6.4 135.0 167.6 (56) (269)
Jet Airways 991 2.1 1.6 16.8 4.9 10.8 15.1 (1.5) (1.7) 5.3 3.8 682 420
Global LCCs
Ryanair 26,168 10.6 9.5 (8.0) 13.8 17.4 14.4 5.4 4.3 34.0 31.8 253 232
EasyJet 6,609 7.1 6.6 8.3 (8.5) 15.1 12.6 1.8 1.6 11.7 13.7 (10) 442
Regional FSC Carriers
China Eastern Airlines 12,878 7.1 6.7 1.9 10.8 8.5 8.7 0.9 0.9 10.8 9.8 18,386 19,777
China Southern Airlines 11,116 5.8 5.4 1.3 (19.9) 9.7 9.1 1.0 0.9 10.8 10.3 15,412 15,190
Air China 17,678 5.8 5.3 (11.0) 7.1 10.0 9.1 1.0 0.9 9.9 9.9 13,372 12,642
Note: pricing as on 23 August 2017; Source: Bloomberg, Elara Securities Estimate

DOMESTIC AIR TRAVEL DEMAND TO GROW AT 20% CAGR IN FY17 -22E
Demand gets leg-up from rising income; enroute to match peers
Trips per capita set to rise with increase in GDP per capita Passenger Load Factor on a continuous upswing
2.0 150,000 100
Developed Countries (mn) (mn)
BRICS
(Excld India) 90
1.5 100,000
FY17 Trips per capita
ASKM Trend CAGR 10.62% 80

India
RPKM Trend CAGR 11.65%
1.0 70
50,000
60
0.5 0 50
FY93
FY95
FY97
FY99
FY01
FY03
FY05
FY07
FY09
FY11
FY13
FY15
FY17
0.0
0 10,000 20,000 30,000 40,000 50,000 60,000
FY17 GDP per Capita (USD), PPP adjusted Domestic ASKM Domestic RPKM Domestic PLF (LHS)
Source: Airbus, IMF, Elara Securities Research Source: DGCA, Elara Securities Research
Domestic air travel demand becoming more stable 10%+ FY17 GDP growth states outperformed PAX growth
20 (%) 30 25
25 (%)
10 20
20
15 13
0 10
5
(10)
0
Q3FY13
Q4FY13
Q1FY14
Q2FY14
Q3FY14
Q4FY14
Q1FY15
Q2FY15
Q3FY15
Q4FY15
Q1FY16
Q2FY16
Q3FY16
Q4FY16
Q1FY17
Q2FY17
Q3FY17
Q4FY17
Q1FY18
0-10% GDP Growth 10%+ GDP Growth Total Domestic

States States Passenger
Growth in FY17
% QoQ changes in domestic passenger movement
Source: DGCA, Elara Securities Estimate Source: DGCA, Ministry of Finance, Elara Securities Estimate

India air travel penetration catching up with global peers
 Domestic air travel witnessed robust CAGR of 20% during FY14-17. Still, India’s air travel penetration in FY17 was at 0.10 trips/capita against
GDP per capita of USD 7153 in FY17 (adjusted for PPP; Source: DGCA and IMF), which is 59% lower than countries with similar GDP/capita
and 76% lower than our BRICS peers.
 We believe the aforementioned gap in India’s air travel penetration with global peers would dissipate expeditiously at 18% CAGR over FY17-
22E, due to rising disposable income supported by increasing working age population.
 Subsequently, domestic passenger travelled would grow at 20% CAGR during FY17-22E, assuming 1.2% population CAGR as per World Bank.
We estimate Trips per capita CAGR of 18% over FY17-22E

Trips per capita
Method 1: GDP per Capita method
India FY17 GDP per capita 7,153 0.10
India FY22E GDP per capita, and trip per capita globally at this GDP per capita 10,893 0.31
Trips per Capita CAGR during FY17-22E 26
Method 2: Ratio of (Working Age population Proportion) over (Per Capita GDP)
India FY17 Ratio of ‘Working Age population' over ‘per capita GDP’ 2,852 0.10
Globally other nations trips per capita at India's ratio of 2,852 0.20
Trips per Capita CAGR FY17-22E 16
Method 3: Ratio of (Proportion of Consumption over GDP) over (Per Capita GDP)
India FY17 Ratio of Proportion of Consumption over GDP’ over ‘per capita GDP’ 3,126 0.10
Globally other nations trips per capita at India's ratio of 3,126 0.17
Trips per Capita CAGR FY17-22E 13
Trips per Capita CAGR FY17-22E - Average of above 3 methods 18
Source: Airbus, IMF, Elara Securities Estimate

Favorable macro factors to spur growth
 We believe air travel growth would be driven by rising income, favourable demography, low oil price environment, shift from train to air travel
and regulations turning supportive
 Given robust GDP growth expectation going forward, rising income level would drive air travel penetration, supported by favourable
demographic factors like rising working age population and rising middle class population share.
Trips per capita is highly correlated with GDP per capita India’s rising GDP to drive air travel demand
2.0 13,000 0.25

Developed Countries (bp)
1.8 (USD)
BRICS
(Excld India)
1.6 11,000
Trips per capita
1.4 0.20
1.2
India 9,000
1.0
0.15
0.8
7,000
0.6
0.4 0.10
5,000
0.2
0.0
0 10,000 20,000 30,000 40,000 50,000 60,000 3,000 0.05
FY16 FY17 FY18E FY19E FY20E FY21E FY22E
GDP per Capita (USD) GDP per Capita (LHS) Trips per capita (RHS)
Source: Airbus, IMF, Elara Securities Research Source: Airbus, IMF, Elara Securities Estimate

Demographic dividend in the works
Rising working age population Working age population normalized for per capita GDP
3.0 Developed Countries 3.0
2.5 2.5 BRICS
Trips per capita
Trips per capita

(Excld India)
2.0 2.0
BRICS
India
1.5 (Excld India) 1.5
1.0 1.0
0.5 0.5 Developed Countries
India
0.0 0.0
50 52 54 56 58 60 62 64 0 5,000 10,000 15,000 20,000 25,000 30,000
Working Age Population % (20-60 yrs) in FY17 Ratio of Working Age Population Over GDP in FY17
Source: Airbus, IMF, World Bank, Elara Securities Research Source: Airbus, IMF, World Bank, Elara Securities Estimate
Middle class a catalyst for higher air travel demand Rising consumption with GDP – another growth driver
5.0
1.8 Developed Countries BRICS
4.0 (Excld India) Developed Countries
1.5
Trips per capita
Trips per capita

BRICS
(Excld India)
1.2 India 3.0 India
0.9
2.0
0.6
1.0
0.3
0.0 0.0
0 20 40 60 80 100 0 5,000 10,000 15,000 20,000 25,000 30,000 35,000 40,000
% of Middle Class of various nations in FY17 Ratio of Consumption as % of GDP per capita in FY17
Source: Airbus, World Bank, Elara Securities Estimate Source: Bloomberg, Airbus, Elara Securities Estimate

Railway capacity constraints diverts traffic to air
 Total air traffic growth (Domestic + International) has witnessed a CAGR of 12% as compared to 3% negative CAGR in Non-Suburban (non-
AC) railway category and just 5% CAGR in Upper Class railway category during FY13-16.
 It is evident that growth in railways is declining or stagnant while there is a strong rise in growth of air traffic. This is due to capacity
constraints at railway upper class and improving income levels leading to more preference for air travel.
 The airfares have decreased over the time by ~20% (during Q3FY15-Q1FY18) with fall in crude prices, and airfares are lower than the railway
fares in majority of the trunk routes, which helps in spurring air travel demand.
 We observed airfares are lower than the 2nd AC railway fares in majority of the trunk routes at least during lean demand season (June-
September 2017).
Railways traffic is on decline or has stagnated Airline fares as % of Railway fares are competitive
30 (%) 16-Jun-17 18-Jul-17 25-Aug-17 18-Sep-17 18-Oct-17
(%)
20 Mumbai-Bangaluru 67 73 83 76 131
Mumbai-New Delhi 70 81 202 80 169
10
Mumbai-Kolkata 83 96 180 82 166
0 Mumbai-Hyderabad 78 78 178 79 123
(10) Kolkata-New Delhi 131 128 380 132 169

Kolkata-Bangaluru 134 133 252 119 248
(20)
New Delhi-Bangaluru 109 75 256 75 119
FY9 FY10 FY11 FY12 FY13 FY14 FY15 FY16
New Delhi-Chennai 81 77 210 83 130
Railways- Upper Class Domestic Air Traffic Railways-Other Non-Surburban Passengers New Delhi-Hyderabad 73 80 156 54 71
Source: Indian Railway, DGCA, Elara Securities Estimate Source: Industry, Elara Securities Estimate

Weak oil price and strong tourism growth driving demand
 We observed inverse relation of crude oil prices with air travel demand. During periods of crude price correction (FY09-10 and FY14-16), air
travel passengers YoY growth was at 19-22%/per annum in succeeding years. While during periods of sharp rise in crude prices (FY08 and
FY12), air travel passengers YoY growth was negative 5-11%/annum in subsequent years.
 The domestic travel within the country is growing at robust pace and enabling air travel demand growth. Domestic tourist visit within India
witnessed 14% CAGR during FY10-15.
 International travel also facilitating domestic and international air travel demand growth to-and-fro India. Foreign Tourists arrival growth has
been at 7% CAGR and Indian nationals departures have been at 11% CAGR over FY10-15.
Crude oil prices decline helped domestic air travel demand Domestic tourism witnessed robust 14% CAGR over FY10-15
40 30
(%) (%)
20
20
0
(20) 10
(40)
0
(60) 2010 2011 2012 2013 2014 2015
FY9 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17
Foreign Tourist Arrivals Indian Nationals Departure
Domestic Air Passengers YoY change Crude Oil price YoY change Domestic Tourists visits within India
Source: Bloomberg, DGCA, Elara Securities Estimate Source: Government of India, Elara Securities Estimate

DOMESTIC SUPPLY-DEMAND MODEL PORTENDS HUGE UNDER -CAPACITY
Domestic supply-demand model portends huge under-capacity
 Indian aviation industry is at huge under-capacity and would remain there at least for 5 years, based on our analysis using
domestic air transport industry data during FY92-17, where we take guidance from a study paper by Boeing on global air transport industry (A
Discussion of the Capacity Supply -Demand Balance within the Global Commercial Air Transport Industry, August 2013).
 For assessing the supply-and-demand balance across the domestic air transport industry, the key indicators that we analyzed using past 25
years data are – Available Seat Kilometres (ASKM) growth rate, Passenger Load Factor (PLF), Aircraft Utilization (AU) and Fleet growth rate.
 Capacity supply and demand is deemed in balance as long as most of above indicators are within their nominal ranges (25th to 75th
percentile of YoY variations) around their underlying long-term trend. We find for domestic aviation, all the four indicator’s 3 years-moving-
avg. has either fallen out above 75th percentile or moving out from nominal range towards 75th percentile, indicating a state of under-capacity.
 Assessment of current under-capacity status
 ASKM growth rate is continuously moving from over-capacity zone in FY15 to under-capacity zone. Median ASKM growth rate is 9.7% per year historically (FY93-FY17)
with a nominal range of year-over-year variations about plus or minus 5.5% per year
 PLF already at under-capacity zone since FY16 and at historic high of 86% in Q1FY18. Passenger load factor has increased from mid-60% in the 1990s to today’s
nearly mid-80%, approximating 0.7% improvement per year and a nominal range of year-over-year variations of plus or minus 1.9% per year
 AU of total fleet of domestic airlines, measured in avg. flight hours per day, is in under-capacity zone since FY16. AU has increased by 8.6 minutes each year over the
past 25 years, with a nominal range of variations of plus or minus 14.9 flight minutes per day.
 Fleet growth rate is in balance but gradually moving towards under-capacity since FY14. Net fleet growth rate has averaged 8% per year since 1994, with a nominal
range of plus or minus 5% around the mean.
 We observed its first time since past 25 yrs that all 4 indicators of domestic aviation are pointing towards under-capacity.

ASKM – spike towards under-capacity zone evident
 Rises in ASKM is closely associated with simultaneous RPKM demand growth, thus any abnormal capacity growth that would otherwise lead to
potential overcapacity or under-capacity is only relevant if it significantly decouples from demand growth.
 Past 5 years (FY12-17) data suggest RPKM growth continuously decoupling from ASKM growth, where RPKM CAGR is at 11% vs ASKM’s 8%.
 Subsequently, ASKM growth rate is continuously moving towards over-capacity zone since FY15.
 Note: Median ASKM growth rate is 9.7% per year historically (FY93-FY17) with a nominal range of year-over-year variations about plus or
minus 5.5% per year.
RPKM growth is continuously outperforming ASKM growth ASKM moving towards under-capacity zone since FY15
140,000 30
(mn) (%) Under Capacity Zone
120,000
20
100,000
ASKM CAGR 10.62% over FY93-17
80,000 10
RPKM CAGR 11.65% over FY93-17
60,000
40,000 0
20,000 Over Capacity Zone

(10)
0
FY93
FY94
FY95
FY96
FY97
FY98
FY99
FY00
FY01
FY02
FY03
FY04
FY05
FY06
FY07
FY08
FY09
FY10
FY11
FY12
FY13
FY14
FY15
FY16
FY17
FY93
FY94
FY95
FY96
FY97
FY98
FY99
FY00
FY01
FY02
FY03
FY04
FY05
FY06
FY07
FY08
FY09
FY10
FY11
FY12
FY13
FY14
FY15
FY16
FY17
ASKM YoY growth Under capacity

Domestic ASKM Domestic RPKM
Over capacity YoY ASKM 3 Yr Moving Avg trend
Source: DGCA, Elara Securities Estimate Source: DGCA, Elara Securities Estimate

PLF – presently at historic high, validating under-capacity
 PLF is on increasing trend since FY05 and its growth becomes steep since FY14, indicating major correction in oil prices and subsequent boost
in passenger demand resulted in continuous delayed response by industry on capacity augmentation.
 Our supply-demand balance model noted PLF at under-capacity zone since FY16.
 Note: PLF has increased from mid-60% in the 1990s to today’s nearly mid-80%, approximating 0.7% improvement per year and a nominal
range of year-over-year variations of plus or minus 1.9% per year.
PLF rising from 65% in FY05 to 85% in FY17 PLF moved to under-capacity since FY16
90 8
(%) (%)
Under Capacity Zone
80 4
70 0
60 (4)
Over Capacity Zone
50 (8)
FY93
FY94
FY95
FY96
FY97
FY98
FY99
FY00
FY01
FY02
FY03
FY04
FY05
FY06
FY07
FY08
FY09
FY10
FY11
FY12
FY13
FY14
FY15
FY16
FY17
FY92
FY93
FY94
FY95
FY96
FY97
FY98
FY99
FY00
FY01
FY02
FY03
FY04
FY05
FY06
FY07
FY08
FY09
FY10
FY11
FY12
FY13
FY14
FY15
FY16
FY17
PLF % PLF Trend (1992-2005) PLF Trend (2005-2017) YoY PLF Growth YoY PLF 3 Yr Under capacity Over capacity

Aircraft utilization – similar to PLF, hits ceiling
 Similar to PLF, AU is on rising trend indicating strong demand growth and long backlog of new fleets delivery is responded by airlines through
improving daily flight hours.
 Our supply-demand balance model noted AU at under-capacity zone since FY16.
 Note: AU of domestic airlines, measured in avg. flight hours per day, is in under-capacity zone since FY16. AU has increased by 8.6 minutes
each year over the past three decades, with a nominal range of variations of plus or minus 14.9 flight minutes per day.
Aircraft daily utilization is approaching its limits AU at under-capacity zone since past 2 years
14 1.5
(hrs)
(%)
12
Under Capacity Zone
10
0.0
8
6 Over Capacity Zone

(1.5)
4
FY93
FY94
FY95
FY96
FY97
FY98
FY99
FY00
FY01
FY02
FY03
FY04
FY05
FY06
FY07
FY08
FY09
FY10
FY11
FY12
FY13
FY14
FY15
FY16
FY17
FY93
FY94
FY95
FY96
FY97
FY98
FY99
FY00
FY01
FY02
FY03
FY04
FY05
FY06
FY07
FY08
FY09
FY10
FY11
FY12
FY13
FY14
FY15
FY16
FY17
YoY hours utilized growth trend Under capacity

Hours Utilized Hours Utilized Trend Over capacity YoY PLF 3 Yr Moving Avg trend

Fleet growth – gradually moving towards under-capacity
 The fleet size is key in balancing capacity supply and demand. Fleet capacity moving from balanced to under-capacity zone
Its dynamics involve multiple elements – new deliveries, changes
40
in parked fleet and retirement of aging fleet. (%)
20 Under Capacity Zone
 Supply-demand model indicate fleet growth is gradually moving
towards under-capacity since FY14. We expect fleet growth 0
Over Capacity Zone
would be partially impacted due to potential run-way capacity (20) Kingfisher Airline closure
constraints in Mumbai, Delhi and Bangaluru.
FY95
FY96
FY97
FY98
FY99
FY00
FY01
FY02
FY03
FY04
FY05
FY06
FY07
FY08
FY09
FY10
FY11
FY12
FY13
FY14
FY15
FY16
FY17
 Note: Net fleet growth rate has averaged 8% per year since YoY Fleet trend Under capacity
1994, with a nominal range of plus or minus 5% around the Over capacity YoY Fleet size 3 Yr Moving Avg trend
mean. Source: DGCA, Airline Companies, Elara Securities Research
Fleet Capacity CAGR at 7.9% from FY1995-FY2017 Runway constraints in major airports by FY20E
600 100
Total Domestic Airlines Fleet Size (nos) FY95-17 CAGR at 7.9% (%)
500 75
400
50
300
200 25
100 0
0 FY16 FY17 FY18E FY19E FY20E
FY95
FY96
FY97
FY98
FY99
FY00
FY01
FY02
FY03
FY04
FY05
FY06
FY07
FY08
FY09
FY10
FY11
FY12
FY13
FY14
FY15
FY16
FY17
Mumbai Delhi Bangaluru

Chennai Kolkatta Hyderabad
Source: DGCA, Air India, IndiGo, Spice Jet, Jet Airways, Elara Securities Estimate Source: AAI, Elara Securities Estimate

International aviation to-and-fro India in balance
 Capacity supplied by domestic airlines on international routes is in a balanced zone, as per our capacity supply demand model, using guidance
from Boeing’s study paper on global industry.
 Assessment of current balanced-capacity status of international aviation industry by domestic airlines
 International ASKM growing at 8.5% CAGR during FY93-17, is in balanced zone. Median ASKM growth rate is 9.4% per year historically
(FY93-FY17) with a nominal range of year-over-year variations about plus or minus 5.5% per year
 International PLF is in balanced zone and is flat at 79% since past 5 years. PLF has increased from mid-60% in the 1990s to today’s
nearly 80%, approximating 0.5% growth per year and a nominal range of year-over-year variations of plus or minus 1.7% per year
 There is no separate bifurcation available for domestic and international fleet. Hence, daily aircraft utilization and fleet growth for
international segment cannot be classified and derived.
International ASKM growth is in balanced zone International PLF too…

40 8 Under Capacity Zone
(%) (%)
20 Under Capacity Zone 4
0
0
(4)
(20) Over Capacity Zone Over Capacity Zone
(8)
FY93
FY94
FY95
FY96
FY97
FY98
FY99
FY00
FY01
FY02
FY03
FY04
FY05
FY06
FY07
FY08
FY09
FY10
FY11
FY12
FY13
FY14
FY15
FY16
FY17
FY93
FY94
FY95
FY96
FY97
FY98
FY99
FY00
FY01
FY02
FY03
FY04
FY05
FY06
FY07
FY08
FY09
FY10
FY11
FY12
FY13
FY14
FY15
FY16
FY17
ASKM YoY growth Under capacity YoY growth trend Under capacity
Over capacity YoY ASKM 3 Yr Moving Avg trend Over capacity YoY PLF 3 Yr Moving Avg trend

INDIAN CARRIERS TO WITNESS STRONG LOAD FACTOR
Domestic carriers to witness stronger PLF and margins
 We analysed that for 18% trips/capita CAGR or 20% domestic passenger growth CAGR during FY17-20E, 317 new fleets would be required.
 However we expect total new fleet addition during FY17-20E would be lower at 225, based on guidance by airline companies and anticipated
delivery schedule of Boeing and Airbus.
 It implies PLF of domestic airlines would become stronger going forward that would support higher yields and EBITDA margins (RASK less
CASK).
New aircraft delivery would lag behind growing demand Domestic airlines to benefit from strong demand and PLF
FY18E FY19E FY20E Cumulative Passenger Growth FY17-20E
FY17 FY18E FY19E FY20E
New aircraft required by (% YoY) CAGR
72 115 130 317
industry
IndiGo 32 22 23 19 22
Expected total fleet addition 68 70 87 225
SpiceJet 25 20 20 19 20
IndiGo 29 25 33 87
Jet Airways 5 8 8 7 8
SpiceJet 6 11 18 35
Jet Airways 3 6 8 17 Domestic Aviation Industry 22 18 23 19 20
Vistara 5 5 5 15 PLF
Go Air 12 12 12 36
IndiGo 84.8 86.7 89.0 88.4
Air Asia 10 10 10 30
SpiceJet 91.6 91.9 90.5 90.8
Air India 3 3 2 8
New fleet addition shortfall 4 45 43 92 Jet air 81.3 81.5 81.4 81.7
Source: Company, Airbus, Boeing, Elara Securities Estimate Source: DGCA, Elara Securities Estimate

Boeing/Airbus backlogs & constraints at metros to boost PLF
 New fleet orders by all domestic carriers is very strong at 876 as on March 2017. However, delivery would be done starting from 2017 till as
far as 2025 due to order back-log of 8-10 yrs at Boeing and Airbus, and then most of the new fleet would replace older fleet after 5 years.
 Moreover, we believe run-way capacity constraint at major airports would also impact aggressive fleet addition by new entrants due to
attractive slots non-availability. It would further support strong PLF and margins of existing players.
New aircraft orders Runway constraints at major airports to limit new entrants
500 (x) 8 Capacity Utilization (%)
(nos)
411
400 Airport FY16 FY17 FY18E FY19E FY20E
6
300 275 Chennai 39 46 50 63 82
4
200 Kolkata 32 39 47 63 84
144
75 2 Delhi 61 71 77 91 97
100
18 7 4
12 Mumbai 93 96 97 98 99
0 0
Indigo SpiceJet Jet Go Air Air India Air Asia Vistara Others Bangaluru 48 55 65 80 92
Airways
Order Book OrderBook/CurrentFleetSize (RHS) Hyderabad 25 31 37 50 75
Source: Airline companies, Elara Securities Estimate Source: AAI, Mumbai Airport, Delhi Airport, Elara Securities Estimate

MUMBAI CONGESTION CASE STUDY – A BIG ENTRY BARRIER
Mumbai airport congestion – advantage incumbents
 We estimated Mumbai airport runway utilization is at 96% (305465 aeroplanes arrivals/departures in FY17, out of estimated 320000 capacity).
 Given Mumbai’s runway capacity approaching its technical limit, we analysed it closely from the point of view of airlines action as regards how
they utilize the limited incremental capacity, because we expect other major airports runways (Delhi and Bangaluru) would approach their
technical limits in 3 years if additional run-ways not developed timely.
 We compare 2017 Summer schedule with 2016 Winter schedule on changes in frequencies of domestic routes connecting Mumbai.
 Following are our key observations (refer exhibits on next slide) :
 Slots addition is dominated by market leaders – Jet Airways and IndiGo together comprises 89% of new slots, Air India and SpiceJet
together added 11% of remaining new slots, and small players (Vistara and GoAir) not able to add even a single slot.
 Off peak hours (12:00PM–6:00PM) dominated 90% of new slots and peak hours (6:00AM-12:00PM and 6:00PM-12:00AM) comprises just
9% of new slots.
 Top 10 cities, in terms of frequency addition, are mostly capitals
 Key take-away
 New slots addition is dominated by market leaders and mostly avoided by others because most of the incremental capacity available is at
off-peak hours. IndiGo and Jet Airways have benefit of large fleet size that they easily devoted to off-peak hours at Mumbai from the
other routes of lower PLF and yield. However, small fleet carriers have limited band-width. It imply larger fleet size offer higher
ability to add slots in constrained airports.
 Frequencies with national and state capitals is rising, while declining with other routes. It implies, though small carriers would not be
able to add new slots in Mumbai, but would indirectly benefit if they already have presence in routes connecting Mumbai
to small cities with lowering of competition and subsequent higher yields.

New slots at off-peak, trunk routes and only by large airlines
Mumbai airport runway capacity reaching its technical limit Slots addition is dominated by market leaders
120 (nos)
(%) 150 124 115
80 100
50 20
40 10 0
0
(2)
0 (50)
FY16 FY17 FY18E FY19E FY20E JetAirways Indigo Air India SpiceJet Vistara Go Air
Mumbai Delhi Bangaluru Chennai Kolkatta Hyderabad Net Additon/Reduction of Flights per Week to/fro Mumbai
Source: AAI, Mumbai Airport, Delhi Airport, Elara Securities Estimate Source: DGCA, Elara Securities Estimate
Off peak hours dominated 90% of new slots Slots additions mostly happened at trunk routes
Top 10 Routes Top 10 Routes
150 127 114 (nos) (nos)
(nos) frequencies addition frequencies reduction
100 Delhi 57 Bangalore (68)
50 33 28 Goa 46 Raipur (32)
8 Vizag 41 Cochin (23)
0 Bhubaneswar 33 Jammu (14)
(50) (6) (10) (27) Amritsar 32 Port Blair (14)
Srinagar 28 Nagpur (9)
00-03 AM
03-06 AM
06-09 AM
09-12 AM
09-12 PM
12-03 PM
03-06 PM
06-09 PM
Chandigarh 26 Coimbatore (5)

Kolkata 25 Rajkot (4)
Patna 25 Udaipur (2)
Net Additon/Reduction of Flights per Week to/fro Mumbai Ahmadabad 14 Guwahati 0

Learning from Mumbai – small carriers proactive in Delhi
 Given current robust growth rate in domestic passengers air travel, we estimate Delhi and Bangaluru would approach their technical limits in 3
years. Subsequently, we analyzed the slots addition strategy by smaller airlines in Delhi as learning from Mumbai runway congestion, so that
airlines have advantage of slots availability during peak hours when Delhi runway would also become slot constrained in future.
 We observed that most of the small airlines (below 100 fleet size) were very active in new frequency addition during 2017 Summer schedule
over 2016 Winter schedule. While large airlines (IndiGo and Air India), except Jet Airways, have reduced their frequency connecting Delhi.
Smaller carriers proactive on slot addition in Delhi

Weekly Frequency to/fro Delhi
Airline 2016 Winter Schedule 2017 Summer Schedule Change in weekly Frequency
Jet Airways 1,239 1,389 150

SpiceJet 720 803 83
Go Air 504 582 78
Air Asia 140 196 56
Vistara 451 491 40
Zoom Air 0 35 35
Air Costa 0 0 0
Air Carnival 0 0 0
True Jet 0 0 0
Air India 1,118 1,087 (31)
IndiGo 2,737 2,497 (240)
Total 6,909 7,080 171
Source: DGCA, Elara Securities Estimate

UNDERSTANDING NETWORK STRATEGY USING ROUTES ANALYSIS
Trunk routes offer stable demand but low volume growth
 We analysed all 278 domestic routes traffic data (source: AAI, DGCA) using 2017 Summer Schedule to understand strategy of each airline.
 We divided all routes on 4 Quartiles (Top 25%, 25%-50%, 50%-75% and 75%-100%) as per passenger traffic volume, where we further
divided Quartile 1 or Top 25% into five categories (Top 5%, 5%-10%, 10%-15%, 15%-20% and 20%-25%).
 We observed IndiGo is focussed on capturing high growth routes market, SpiceJet is focussed on less competition routes (non Top 25%) to
maintain high PLF. While Jet Airways is stuck with major 36% of its capacity on highest competition Top 5% routes category, characterized by
lowest yield and least FY17-20E passenger CAGR at 11% versus 20% of the industry due to potential capacity constraints at major airports.
Passenger volume wise routes categorization and share of capacity commitment of carriers
Share of routes on operator commitment
Routes Category (in terms of YoY PAX volume

Industry Pax Volume Share IndiGo SpiceJet Jet Airways Air India Others
PAX volume) growth
1st Quartile (Top 25%) 22 80 68 60 73 64 69
Top 5% 15 38 26 19 36 26 28
5%-10% 31 17 15 17 15 12 16
10%-15% 31 11 11 9 8 12 13
15%-20% 23 8 8 10 11 7 6
20%-25% 25 6 7 4 2 6 6
2nd Quartile (Top 25%-50%) 30 15 20 19 16 21 18
3rd Quartile (Top 50%-75%) 9 4 8 15 7 9 9
4th Quartile (Top 75%-100%) (31) 1 4 5 4 6 4
Total 22 100 100 100 100 100 100
Note: for each Quartile route details, refer Appendix V; YoY PAX volume growth is calculated for Aug’16-Mar’17 over Aug’15-Mar’16; Source: AAI, DGCA, Elara Securities Estimate

Competition reduces from top to lower Quartile routes
 To quantify competition on the routes, we use Herfindahl-Hirschman Index (HHI). HHI score at 10000 imply monopoly and score below 3000
imply highly competitive market.
 Despite higher capacity commitment on high competition Top 25% routes, IndiGo enjoys highest HHI score on all routes category, because
airline has highest share (among its commitment) of routes served by just 1-2 airlines (refer exhibit on next slide). Though routes served by
1-2 airlines have lower daily frequency of IndiGo as compared to that on major truck routes, but these routes offer higher yield and thus
compensate for lower yield on major trunk routes.
 We observed in previous slide that SpiceJet has lowest of its capacity commitment share on highest competition Top 25% routes and highest
of its capacity commitment share on 3rd Quartile (Top 50%-75% routes) as compared to other airlines. Thereby SpiceJet is benefitting from
high HHI score and higher passenger yield as 3rd Quartile routes have ~50% higher yield over 1st Quartile routes (Top 25%).
HHI score of airlines as per routes category – IndiGo has highest and Jet Airways has lowest HHI score
Routes Category (in terms of YoY volume
Average HHI Per Passenger
PAX volume) growth
Price Yield
Industry HHI IndiGo SpiceJet Jet Airways Air India Others
1st Quartile (Top 25%) 22 3,081 3,332 3,040 2,959 2,961 2,748 2,457
Top 5% 15 2,725 2,845 2,752 2,726 2,640 2,491 2,487
5%-10% 31 2,928 3,212 2,931 2,815 3,587 2,601 2,585
10%-15% 31 3,163 3,440 3,039 2,758 1,784 2,940 2,259
15%-20% 23 3,641 3,845 3,496 3,775 5,804 3,135 2,471
20%-25% 25 4,302 4,710 3,682 4,275 1,493 3,676 2,299
2nd Quartile (Top 25%-50%) 30 5,310 5,986 4,753 5,115 4,029 4,330 3,275
3rd Quartile (Top 50%-75%) 9 6,360 7,195 5,515 6,376 4,597 4,869 3,761
4th Quartile (Top 75%-100%) (31) 8,536 321 385 349 5,951 7,807 4,501
Average 22 4,010 4,450 4,060 3,886 3,896 3,384 2,811
Note: Passenger Price Yield is calculated from airfares for 30 August 2017 journeys observed on 30 July 2017: Source: 2017 Summer Schedule, Elara Securities Estimate

Yield significantly improves with falling competition
 We find IndiGo and SpiceJet share of 1-2 airline servicing routes is highest among their own total routes, which helps them maintaining
margins stability and also offsetting lower yields from other high competition routes.
 However, we observed Jet Airways’s own share is lowest among 1-2 airlines servicing routes, due to highest exposure to high competition Top
5% routes owing to its complex network management strategy of code sharing with international players. Subsequently, Jet Airways HHI
score is lowest among top 4 carriers, implying least pricing power in domestic market and risk of lower PLF due to less flexibility on changing
the flight frequencies.
Routes classification as per served by no. of airlines

Routes IndiGo SpiceJet Jet Airways Air India Other Airlines Total Domestic Avg.
% of % of % of % of % of % of Passenger
No. No. No. No. No. No. Yield
Airline Airline Airline Airline Airline Airline
Served by 1-2 91 49 46 39 41 36 46 38 28 27 175 63 4,033

Served by 3-4 58 31 38 32 42 37 41 34 38 37 66 24 2,805
Served by 5-6 30 16 28 24 24 21 27 22 30 29 30 11 2,663
Served by 7-8 7 4 7 6 7 6 7 6 7 7 7 3 2,679
Total 186 100 119 100 114 100 121 100 103 100 278 100
FY17 RASK 3.40 3.77 4.99
Note: Passenger Price Yield is calculated from airfares for 30 August 2017 journeys observed on 30 July 2017: Source: 2017 Summer Schedule, Elara Securities Estimate

LCCs find easier to focus on low competition routes
 We apply bottom-up analysis to forecast demand growth of each of the 278 routes to estimate each airline’s growth potential. We ascribe
future growth of each route by assuming similar above/below/at-par industry growth as in the past, and then cap growth for potential runway
capacity constraint on that route. Then based on commitment in 2017 Summer schedule, we observed growth potential of each airline.
 We observed growth of Top 5% routes would under-perform on capacity constraints at Mumbai. Top 5%-20% routes to witness above
industry growth till FY19E and then slow down from FY20E on capacity constraint at Delhi and Bangaluru. Top 20%-25% and 2nd Quartile
(Top 25%-50%) routes to witness highest passenger CAGR on no capacity constraint at airports and favourable macro-economic factors.
 IndiGo – would enjoy highest growth among domestic carriers due to higher exposure in 2nd Quartile (Top 25%-50% routes).
 SpiceJet – would also benefit from higher exposure in 2nd Quartile. Highest exposure in lower growth 3rd Quartile to lower overall growth as
compared to IndiGo, but would help maintain highest PLF due to least competition on 3rd Quartile.
 Jet Airways – highest exposure in Top 5% route imply growth would be lowest and pricing power would be least due to highest competition.
Each route category growth rate and airlines commitment on that route category
Domestic Passenger growth rate Share of routes on operator commitment
Routes Category (in terms of PAX volume) FY17 FY18E FY19E FY20E FY17-20E CAGR IndiGo SpiceJet Jet Airways
1st Quartile (Top 25%) 21.7 17.1 20.6 15.0 18 67.7 60.1 72.7
Top 5% 15.0 12.5 13.2 8.6 11 26.4 19.0 36.0
5%-10% 30.7 21.8 28.1 20.5 23 15.5 17.3 15.3
10%-15% 31.1 18.6 24.4 16.0 20 10.8 9.4 7.9
15%-20% 23.4 22.4 26.1 16.8 22 8.2 10.2 11.3
20%-25% 25.0 23.1 27.7 28.0 26 6.8 4.3 2.3
2nd Quartile (Top 25%-50%) 29.8 26.2 33.8 33.6 31 20.3 19.4 16.3
3rd Quartile (Top 50%-75%) 8.9 9.0 23.6 22.4 18 8.1 15.4 6.5
4th Quartile (Top 75%-100%) (30.6) (12.0) 19.2 20.1 8 3.9 5.0 4.4
Total 21.8 18.0 22.9 18.6 20 100.0 100.0 100.0
Source: 2017 Summer Schedule, Elara Securities Estimate

INTERGLOBE AVIATION – NUMERO UNO PLAYER
INDIGO IN Mcap: INR 439bn Buy
InterGlobe Aviation TP: INR 1,737 CMP: INR 1,214 Upside: 43%
Investment summary
 Profitably increasing market share with aggressive order book: IndiGo has largest order book of 430 A320Neo fleets, of which 22 has been delivered and rest till
2026. Largest order book ensures company would add ASKM at 20% CAGR over FY17-20E to capture similar demand CAGR and also get discounts on maintenance, aircraft
purchase and rentals to keep CASK under control. IndiGo’s domestic market share would rise from present 40% to 43% in FY20E.
 Balance network strategy – retain trunk routes leadership, capture high growth non-trunk routes with pricing power: Routes analysis indicate IndiGo
deployed 26% of its capacity in Top 5% routes (Top 15 PAX volume routes), that helps maintain leadership in trunk routes. Moreover, company deployed 20% of its
capacity on Quartile 2 routes (Top 25%-50%), which is highest by any carrier of its share. These routes grew fastest rate at 30% YoY in FY17. Out of 186 domestic routes
served by IndiGo, routes served by just 1-2 carriers are 49%, which is highest by any domestic carriers and generate pricing power with lower competition.
 Fuel efficient A320Neo aircraft additions to retain cost leadership: Upcoming A320Neo aircrafts would reduce fuel consumption per departure by 15-20% by FY20E
and would help maintain lower fleet age of below 6yrs that would keep maintenance cost under control.
 EBITDAR/PAT CAGR of 29%/40% over FY17-20E: FY18E-20E ROCE would be 59-86% and coverage ratios are healthy at 13-21 EBIT/Interest-Expense.
Valuation
We initiate IndiGo with BUY rating at TP of INR1737, by ascribing 9.3X EV/EBITDAR multiple, assuming 15% premium over global LCC peers up-cycle multiple of 8.1x (Ryanair
and EasyJet) on IndiGo’s strong EBITDAR growth.
Key risks
Rupee weakening, sharp increase in crude prices, increase in competition, demand slowdown and delay in resolution of A320Neo engine issues.
Financials
YE Revenue YoY EBITDAR EBITDAR Adj PAT YoY EPS ROE ROCE P/E EV/EBITDAR
March (INR mn) (%) (INR mn) margin (%) (INR mn) (%) (INR) (%) (%) (x) (x)
FY17 185,805 15.1 52,687 (6.3) 16,592 (16.5) 45.9 59.1 30.8 26.4 7.2
FY18E 240,901 29.7 77,164 46.5 30,542 84.1 84.5 79.3 58.9 14.4 4.7
FY19E 302,114 25.4 98,696 27.9 41,351 35.4 114.4 104.9 80.5 10.6 3.6
FY20E 355,429 17.6 112,589 14.1 45,922 11.1 127.0 111.9 86.3 9.6 3.0
Note: pricing as on 23 August 2017; Source: Company, Elara Securities Estimate

PAT CAGR of 40% during FY17-20E
Passenger volume CAGR of 22% over FY17-20E Operating cashflow to swell by 67% over FY17-20E
100 70,000
(mn nos) (INR mn)
60,000
80
50,000
60 40,000
40 30,000
20,000
20
10,000
0 0
FY15 FY16 FY17 FY18E FY19E FY20E FY15 FY16 FY17 FY18E FY19E FY20E
Source: Company, Elara Securities Estimate Source: Company, Elara Securities Estimate
EBITDAR CAGR of 29% during FY17-20E PAT CAGR of 40% over FY17-20E
120,000 50,000
(INR mn) (INR mn)
100,000 40,000
80,000
30,000
60,000
20,000
40,000
20,000 10,000
0 0

Robust order book to ensure market share gains
 IndiGo has largest order book among Indian carriers of 430 A320Neo fleets, of which 180 ordered on June 2011 and 250 on August 2015.
Company already received 22 A320Neos till Q1FY18, resulting in total fleet size of 135 at present including older 113 A320Ceos.
 June 2011 ordered fleet would be received by 2023 and rest by 2026. Thus company guided 20% capacity growth CAGR during FY17-20E,
that would be partially impacted in near-term due to P&W’s engine issues in A320Neo and expected to be resolved during H2FY18.
 Largest order book ensures 20% ASKM CAGR over FY17-20E to capture similar demand CAGR and would help increase domestic market
share. We estimate IndiGo’s domestic market share would increase from present 40% to 43% by FY20.
 Strong order book also keep costs (CASK) under control by fetching higher discounts on maintenance, aircraft purchase and rentals, implying
ability to maintain profit even during volatile crude/currency/demand environments due to lower cost cushion.
IndiGo passenger volume grew at 28% over FY12-17 IndiGo would continuously gain domestic market share
50 50 47
(mn) 43.5 (%) 45
42 43
40 45 41
33.2 40
30 25.2 40 37
19.6 34
20 16.9 35
12.8 29
10 30
0 25
FY12 FY13 FY14 FY15 FY16 FY17 FY14 FY15 FY16 FY17 FY18E FY19E FY20E FY21E FY22E
Domestic International Domestic Market Share of Indigo
Source: Company, Elara Securities Research Source: Company, Elara Securities Estimate

Network Strategy to help sustain leadership and growth…
 Routes analysis indicate IndiGo deployed 26% of its capacity in Top 5% routes (Top 15 routes), that helps maintain leadership in trunk
routes.
 Unlike Jet Airways, company has taken care not to over expose in highest competition Top 5% routes, and focus on increasing aircraft
utilization and PLF to retain leadership position with more than 40% passenger volume in those routes.
 Thus IndiGo is able to use available capacity in Quartile 2 routes (Top 25%-50%) whose passenger volume grew 30% YoY in FY17 and offers
major growth potential in future with favourable macro indicators and no airport runways capacity constraints till FY20E.
IndiGo aggressive on Quartile 2 routes for higher growth Share of routes on operator’s commitment
Share of routes on operator commitment
(%) (%)
40 30 Routes YoY PAX Industry Jet Air
IndiGo SpiceJet Others
35 Category (%) PAX share Airways India
30 1st Quartile
25 20
Top 5% 15 38 26 19 36 26 28
20
5%-10% 31 17 15 17 15 12 16
15 10
10 10%-15% 31 11 11 9 8 12 13
5 15%-20% 23 8 8 10 11 7 6
0 0 20%-25% 25 6 7 4 2 6 6
Top 5% 5%- 10%- 15%- 20%- 2nd 3rd 4th 15 20 19 16 21 18
2nd Quartile 30
10% 15% 20% 25% Quartile Quartile Quartile
3rd Quartile 9 4 8 15 7 9 9
Industry Pax Volume Share YoY PAX volume growth Indigo (RHS) 1 4 5 4 6 4
4th Quartile 0
Source: DGCA, Elara Securities Estimate Source: DGCA,, Elara Securities Estimate

… and enhancing pricing power
 IndiGo enjoys highest HHI score on all routes category, implying airline has formulated network strategy such that it’s network faces less
competition as compared to others.
 We observed reason for highest HHI score of IndiGo is because routes served by just 1-2 carriers comprises of 49% of total 186 domestic
routes served by IndiGo, which is highest by any domestic carriers.
 Though routes served by 1-2 airlines have lower daily frequency by IndiGo as compared to that on major truck routes, but these routes offer
higher yield and thus compensate for lower yield on major trunk routes.
 Notably, routes served by 1-2 airlines offer 44%-51% higher average passenger yield over other routes, using airfares as on 30 July 2017 for
30 August 2017 journeys.
 We believe such routes generate higher pricing power with lower competition for IndiGo.
Share of operator commitment as per airlines per route IndiGo outperforms on HHI score
60 (%) 10,000 (INR) (Yield INR) 5,000
(Yield INR) 4,500
45 8,000 4,000
3,000
30 6,000 3,000
1,500 4,000 2,000
15
0 0 2,000 1,000
Served by 1-2 Served by 3-4 Served by 5-6 Served by 7-8 0 0
Indigo SpiceJet Top 5% 5%- 10%- 15%- 20%- 2nd 3rd 4th
Jet Airways Air India 10% 15% 20% 25% Quartile Quartile Quartile
Other Airlines Industry Average
Avg. Passenger Yield (RHS) Industry HHI Indigo Avg. Passenger Yield (RHS)
Source: DGCA, Elara Securities Estimate Note: Passenger Yield as on 30 July 2017 for 30 August 2017 journeys; Source: DGCA, Elara Securities Estimate

Growth leverage to push PLF and gross margin higher
 We estimate IndiGo would not only benefit from higher market share in domestic aviation, but would witness highest PLF growth vs listed
domestic peers (Jet Airways and SpiceJet) due to its major presence in Top 5%-15% and Quartile 2 (Top 25%-50%) routes that are growing
at fastest rate (~30% YoY during FY17).
 We estimate airline’s PLF would increase from 84.8% in FY17 to 88.4% in FY20.
 Subsequently, IndiGo’s RASK (Revenue per ASKM, measure of unit airfares per passenger per KM) would improve from INR3.4 in FY17 to
INR3.8 in FY20E and thus its RASK discount over listed peers would narrow. Note, during FY17, SpiceJet’s RASK was INR3.8 and Jet Airways’s
RASK was INR4.2
 Consequently, IndiGo’s unit gross margin (RASK less CASK) would rise from INR0.3 in FY17 to INR0.6 in FY20E.
IndiGo’s PLF continuously rising with strong demand growth IndiGo’s unit gross margin would strengthen
100,000 90 0.8
(%) 0.7 0.7
(mn) (INR/ASKM) 0.6
0.6
80,000 0.6 0.5
85
60,000
0.4 0.3
40,000
80
20,000 0.2
0 75 0.0
ASKM RPKM PLF (RHS) RASK-CASK Gross Margin

A320Neo aircraft additions to retain cost advantage
 Upcoming A320Neo aircrafts would reduce fuel consumption per departure by 15-20%, and would also help maintain lower fleet age of below
6yrs that would require lower maintenance cost.
 As per company’s guidance in Q1FY18, airline fleet size would increase at 20% CAGR during FY17-20E due to addition of A320Neo aircrafts as
per company’s June 2011 order for 180 fleet.
 We estimate A320Neo share on IndiGo’s total fleet would increase from 15% by end-FY17 to 51% by end-FY20. Higher share of A320Neo
would help maintain lower fleet age of 5.1 yrs by FY20E from 5.3 yrs in FY17, implying maintenance cost would remain low.
 We estimate IndiGo’s CASK (ex-fuel) would remain flat at ~INR1.9 during FY17-20E.
IndiGo Fuel-CASK would be under control with new A320Neo IndiGo’s fleet average life would remain below 6 years
2.0 60 6.0 5.3 5.4 5.1
(INR) (%) (Years) 4.6 4.9
50 5.0
1.8
40 4.0 3.3
1.6 2.7
30 3.0 2.6
1.4
20 2.0
1.2 10
1.0
1.0 0
FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18E FY19E FY20E 0.0
FY13 FY14 FY15 FY16 FY17 FY18E FY19E FY20E
Fuel CASK A320 Neo share in total Indigo fleet (RHS) Indigo-Average Fleet Age

IndiGo – Key financial and volume highlights
FY15 FY16 FY17 FY18E FY19E FY20E CAGR (FY17-20E)
ASKM (mn) 35,327 42,827 54,583 65,272 78,252 94,012 20
RPKM (mn) 28,177 35,969 46,285 56,607 69,609 83,088 22
Load factor (%) 79.8 84.0 84.8 86.7 89.0 88.4 1
Revenue (INR mn) 1,39,253 1,61,399 1,85,805 2,40,901 3,02,114 3,55,429 24
EBITDAR (INR mn) 38,219 56,247 52,687 77,164 98,696 1,12,589 29
EBITDAR margins (%) 27.4 34.8 28.4 32.0 32.7 31.7 4
EBITDA (INR mn) 18,697 31,180 21,433 40,738 54,803 59,335 40
EBITDA margins (%) 13.4 19.3 11.5 16.9 18.1 16.7 13
Adjusted PAT (INR mn) 13,042 19,862 16,592 30,542 41,351 45,922 40
EPS (INR) 37.9 55.1 45.9 84.5 114.4 127.0 40
IndiGo – Key operating metrics

Average USD/INR rates 61.1 65.4 67.1 64.9 65.0 65.0 (1)
Brent crude (USD/bbl) 86.0 47.7 48.5 53.8 55.0 55.0 4
Year-end fleet 94 107 131 160 185 228 20
Total passengers 25.2 33.1 43.5 53.2 65.4 78.1 22
Total load factor (%) 79.8 84.0 84.8 86.7 89.0 88.4 1
Aircraft utilization (hrs/day) 11.4 11.1 11.7 12.8 12.8 12.9 3
ASKM (mn) 35,327 42,827 54,583 65,272 78,252 94,012 20
RPKM (mn) 28,177 35,969 46,285 56,607 69,609 83,088 22
Revenue yield (INR/RPK) 4,882 4,250 3,721 3,961 4,040 3,982 2
RASK (INR) 3.9 3.8 3.4 3.7 3.9 3.8 4
Fuel exp/ASK (INR) 1.6 1.1 1.2 1.2 1.2 1.2 1
RASK-Fuel exp/ASK (INR) 2.3 2.6 2.2 2.5 2.6 2.6 5
Aircraft and engine rentals/ASK 0.6 0.6 0.6 0.6 0.6 0.6 (0)
Employee expenses/ASK 0.3 0.4 0.4 0.4 0.4 0.4 4
Selling expenses/ASK 0.2 0.2 0.2 0.2 0.2 0.2 1
Other expenses/ASK 0.6 0.7 0.7 0.7 0.7 0.7 3
Interest cost/ASK 0.0 0.1 0.1 0.0 0.0 0.0 (23)
CASK (INR) 3.4 3.1 3.1 3.1 3.2 3.2 1
CASK ex fuel (INR) 1.8 2.0 1.9 1.9 1.9 2.0 1
RASK-CASK (INR) 0.5 0.7 0.3 0.6 0.7 0.6 22
Source: Company, Elara Securities Estimate

Valuation
 We initiate IndiGo with BUY rating at TP of INR1737, by ascribing 9.3X EV/EBITDAR multiple, assuming 15% premium over global LCC peers
up-cycle multiple of 8.1x (Ryanair and EasyJet ) on IndiGo’s strong 29% FY17-20E EBITDAR CAGR.
LCC peers valuation metrics

EBITDAR
Companies Mcap EV/EBITDAR (x) EPS CAGR (%) P/E (x) P/B (x) ROE (%) Net Debt (USD mn)
CAGR (%)
Global LCCs
Ryanair 26,168 10.6 9.5 (8.0) 13.8 17.4 14.4 5.4 4.3 34.0 31.8 253 232
EasyJet 6,609 7.1 6.6 8.3 (8.5) 15.1 12.6 1.8 1.6 11.7 13.7 (10) 442
Average 8.9 8.1 0.2 2.7 16.2 13.5 3.6 3.0
Note: pricing as on 23 August 2017; Source: Bloomberg, Elara Securities Research
IndiGo valuation table

Comments FY19 value (INR mn) Multiple (X) Total Value (INR mn) INR/share
FY19E EBITDAR 98,696 9.3 919,352 2,543
Add: FY18E Net Cash 35,385 98
Less: FY19E Operating lease rent Capitalized at 8.0x 43,893 8.0 351,147 971
Add: Dividend Payout in FY18E 24,434 1.0 24,434 68
Equity value 628,025 1,737


Sensitivity and Risks
 Every 5% increase in demand growth, improves TP by 15% and FY19E EPS by 19%.
 Every rupee strengthening by INR5/USD, improves TP by 17% and FY19E EPS by 21%.
 Every crude price weakening by USD5/bbl, improves TP by 15% and FY19E EPS by 18%.
Risks: Rupee weakening, increase in crude prices, increase in competition, demand slowdown and delay in resolution of A320Neo engine issues
TP upside/downside over CMP under different scenarios EPS as % of Elara Base Case EPS under different scenarios
FY19E Passenger Demand Growth (%) FY19E Passenger Demand Growth (%)
(Base Case) (Base Case)
Crude INR 13.0 18.0 28.0 33.0 Crude INR 13.0 18.0 28.0 33.0
23.0 23.0
45 60 41 63 85 107 129 45 60 (1) 18 37 56 76
45 65 19 41 63 84 106 45 65 (20) (1) 18 37 56
45 70 (3) 19 40 62 84 45 70 (39) (20) (1) 17 36
55 60 22 43 65 87 109 55 60 (17) 2 21 40 59
55 65 Base Case (2) 20 41 63 85 55 65 Base Case (38) (19) 0 19 38
55 70 (26) (4) 17 39 60 55 70 (60) (40) (21) (2) 17
65 60 2 24 46 67 89 65 60 (34) (15) 4 23 42
65 65 (24) (2) 20 42 63 65 65 (58) (37) (18) 1 20
65 70 (49) (27) (6) 16 37 65 70 (82) (61) (41) (21) (3)

Company description
 Interglobe aviation (IndiGo) dominates the domestic aviation industry with 40% market Key persons
share. Initially, it commenced its operations as a Private Limited Company, but with time got  Mr. Devadas Mallya Mangalore (Chairman
converted into a Public Limited Company and was finally got listed in 2015. The hub of the and Non-Executive Independent Director)
airline is in New Delhi. The LCC model has helped IndiGo to gain high yields and perform  Mr. Rahul Bhatia (Promoter and Non-
Executive Director)
better than its peers. Presently, it has committed to cater to 186 routes in India and has a
 Mr. Rakesh Gangwal (Promoter and Non-
fleet size of 136 aircraft including 114 A320Ceo and 22 A320Neo, thus maintaining a strong Executive Director)
market positioning. IndiGo is known for its on-time service and competitive pricing. IndiGo
 Ms. Rohini Bhatia (Non-Executive Director and
has the highest aircraft utilization rate (12-13 hours a day during FY17) which has helped in Senior Vice President)
reducing costs.  Mr. Aditya Ghosh (President and whole-time
Director)
Key metrics Domestic Market share Shareholding Pattern (%)

FY15 FY16 FY17 Others Others Shobha
Air India
13.6 0.9 Shobha 14.15 Gangwal
No. of Departures 192,920 225,341 300,526 Gangwal &
Air Asia 26.47
Hours 354,276 398,808 558,568 J. P. Morgan
3.0 IndiGo Trust
Kms Flown ('000) 174,544 213,509 273,660 Go Air 39.7 Company Of
8.6 Delaware
Fleet Size (No.) 94 107 131
Vistara 15.59 Rakesh
Passenger carried (Mn) 25.2 33.1 43.5 3.2 Gangwal
9.64
ASKM (Mn) 35,327 42,827 54,583 Interglobe
RPKM (Mn) 28,177 35,969 46,285 JetAirways Enterprises
18.1 SpiceJet Limited
Load Factor (%) 79.8 84.0 84.8 13.0 42.49
Source: Company, Elara Securities Research Source: Company, Elara Securities Research Source: Company, Elara Securities Research

Destinations Map of IndiGo
Srinagar
Jammu
Amritsar Chandigarh
Dehradun
Delhi Kathmandu
Jaipur Dibrugarh
Lucknow Bagdogra
Guwahati
Doha Patna
Sharjah Udaipur Dimapur
Varanasi
Dubai Ranchi Imphal
Ahmadabad Indore Agartala
Muscat Raipur Kolkata
Vadodara
Nagpur
Pune Bhubaneswar
Mumbai
Hyderabad Visakhapatnam
Bangkok
Goa
Bengaluru
Mangalore Chennai Port Blair
Kozhikode Coimbatore
Kochi Madurai
Thiruvananthapuram
Singapore
Source: Company, Elara Securities Research

Key Financials
Income Statement (INR mn) FY17 FY18E FY19E FY20E Cash Flow Statement (INR mn) FY17 FY18E FY19E FY20E
Net operating income 185,805 240,901 302,114 355,429 Operating cash flow 12,901 42,108 47,002 60,080
Aircraft fuel 64,651 78,288 97,735 1,14,537
Capex (4,512) 5,600 4,963 6,237
Employee expenses 20,482 25,458 31,823 39,779
Free cash flow to firm 8,389 47,708 51,964 66,317
Selling and Distribution Expenses 11,971 14,637 17,997 21,481
Other operating expenses 36,015 45,353 55,863 67,043 Investing cash flow 19,868 3,187 5,056 5,886
EBITDAR 52,687 77,164 98,696 112,589 Financing cash flow (23,630) (33,278) (42,761) (48,542)
Aircraft Lease Rentals 31,254 36,425 43,893 53,253 Net change in cash 9,139 12,017 9,296 17,424
EBITDA 21,433 40,738 54,803 59,335 Closing cash 46,325 58,343 67,639 85,063
Depreciation 4,573 4,259 4,694 5,104 Ratio Analysis FY17 FY18E FY19E FY20E
EBIT 16,861 36,479 50,108 54,232
Income Statement Ratios (%)
Interest cost 3,308 2,870 2,695 2,575
Other income 7,891 8,787 10,019 12,124 Revenue growth 15.1 29.7 25.4 17.6
PBT 21,443 42,397 57,432 63,780 EBITDAR growth (6.3) 46.5 27.9 14.1
Less: Taxation 4,852 11,855 16,081 17,858 EBITDA growth (31.3) 90.1 34.5 8.3
Effective tax rate (%) 3 5 5 5 Adj PAT growth (16.5) 84.1 35.4 11.1
Adj PAT 16,592 30,542 41,351 45,922 EBITDARM 28.4 32.0 32.7 31.7
Exceptional item 0 0 0 0
EBITDAM 11.5 16.9 18.1 16.7
Reported PAT 16,592 30,542 41,351 45,922
Balance Sheet (INR mn) FY17 FY18E FY19E FY20E Adj net margin 8.9 12.7 13.7 12.9
Equity capital 3,615 3,615 3,615 3,615 Return & Liquidity Ratios
Reserves 34,177 35,634 36,008 38,874 PBIT/Int 5.1 12.7 18.6 21.1
Total borrowings 23,957 22,957 22,707 20,957 Net debt/Equity (x) (0.6) (0.9) (1.1) (1.5)
Deferred taxes 1,618 1,618 1,618 1,618 ROE (%) 59.1 79.3 104.9 111.9
Other Liabilities 40,884 44,487 46,074 53,629
ROCE (%) 30.8 58.9 80.5 86.3
Total liabilities 104,251 108,312 110,022 118,693
Fixed assets 38,190 39,531 39,800 40,934 Per Share Data & Valuation Ratios
Investments 37,134 37,134 37,134 37,134 Diluted Adj EPS (INR) 45.9 84.5 114.4 127.0
Other non-current assets 3,646 3,646 3,646 3,646 Adj EPS growth (16.7) 84.1 35.4 11.1
Inventories 1,632 2,361 2,741 3,130 Book value (INR) 104.6 108.6 109.6 117.5
Debtors 1,587 2,024 2,350 2,683 DPS (x) 34.0 67.6 91.5 101.6
Cash 46,325 58,343 67,639 85,063
P/E (x) 26.4 14.4 10.6 9.6
Loans & advances 19,938 19,938 19,938 19,938
EV/EBITDAR (x) 7.2 4.7 3.6 3.0
Other current assets 3,645 3,645 3,645 3,645
Net current assets 25,281 28,000 29,419 36,978 Price/Book (x) 11.6 11.2 11.1 10.3
Total assets 104,251 108,312 110,022 118,693 Dividend yield (%) 2.8 5.6 7.5 8.4

SPICEJET – TURNAROUND MAHARAJA
SJET IN Mcap: INR 77bn Buy
SpiceJet TP: INR 170 CMP: INR 128 Upside: 33%
Investment summary
 Aggressive network strategy of more focus on non-trunk routes to retain highest utilization and pricing power: SpiceJet’s PLF at 91.6% in FY17 was highest
in the domestic industry. We estimate airline’s FY18E/FY19E PLF would remain strong at 91.9%/90.5% due to strong demand growth. SpiceJet deploys 15% of capacity on
Quartile 3 (Top 50%-75%) routes, which is highest by any airline. Quartile 3 routes earn 53% higher avg. passenger yield over that of high competition Quartile 1 routes
(Top 25%). SpiceJet’s FY17 RASK is at 11% premium (at INR3.8) over its LCC competitor IndiGo.
 Healthy order book, highest after IndiGo, to ensure retention of market share in highest growing aviation market: Company’s fleet order book of 275 is
second highest among domestic airlines and ratio of order-book/current-fleet at 5.4 is also second highest, after Go Air. Thereby, SpiceJet would retain its 13% market
share and able to increase too if its recent foray in govt. promoted Regional Connectivity Scheme become success in few years.
 Brand re-building on the way: After resolving the legacy issue from near bankruptcy in FY15, SpiceJet focuses on brand re-building through better customer experience
via on-time performance (OTP). During FY17, SpiceJet’s OTP was highest among domestic airlines.
 Robust FY17-20E EBITDAR/PAT CAGR: SpiceJet would report EBITDAR CAGR of 29% and PAT CAGR of 44% during FY17-20E.
Valuation
We initiate SpiceJet with BUY rating at TP of INR170, ascribing 8.5x FY19E EV/EBITDAR. We ascribe 8.5X EV/EBITDAR multiple by assuming 5% premium over its global LCC
peers multiple of 8.1x (Ryanair and EasyJet) due to strong EBITDAR growth.
Key risks
Rupee weakening, sharp increase in crude prices, increase in competition, demand slowdown and adverse Court Judgment on case with Marans
Financials
FY17 61,913 21.7 15,039 12.0 3,922 1.6 6.5 NA 62.7 19.6 5.6
FY18E 80,062 29.3 21,822 45.1 8,094 106.4 13.5 NA 88.0 9.5 3.3
FY19E 98,998 23.7 27,408 25.6 10,045 24.1 16.8 813.5 53.2 7.6 2.1
FY20E 1,15,438 16.6 32,469 18.5 11,729 16.8 19.6 96.8 37.8 6.5 1.3

30 25,000
(mn) (INR mn)
25 20,000
15,000
20
10,000
15 5,000
10 0
(5,000)
5
(10,000)
0 FY15 FY16 FY17 FY18E FY19E FY20E
FY15 FY16 FY17 FY18E FY19E FY20E
40,000 15,000
(INR mn) (INR mn)
10,000
30,000
5,000
20,000 0
10,000 (5,000)
(10,000)
0 FY15 FY16 FY17 FY18E FY19E FY20E
FY15 FY16 FY17 FY18E FY19E FY20E

Added focus on non-trunk routes to sustain peak utilization
 SpiceJet’s PLF at 91.6% in FY17 was highest in the domestic industry due to its unique strategy of more focus on non-trunk routes. This
strategy appears risky prima-facia but pays fruits due to lower competition and higher capacity utilization and thus resulted in higher RASK
and average passenger yield over domestic LCC peers.
 We estimate SpiceJet’s FY18E/FY19E PLF would remain strong at 91.9%/90.5% on strong demand growth.
Capacity commitment share of airlines on each Quartile SpiceJet outperform its peers on PLF
50 30 100
(%) (%) (PLF %)
40
75
20
30
50
20
10
10 25
0 0
1st Quartile (Top 5% 1st Quartile (ex. Top 2nd-4th Quartile 0
routes only) 5% routes) FY14 FY15 FY16 FY17 FY18E FY19E FY20E
Indigo SpiceJet Jet Airways Air India Others YoY PAX growth (RHS) Indigo SpiceJet Jet Airways

Highest utilization drives higher pricing
 We estimate Quartile 3 market is highly skewed towards top 2 airlines with combined capacity share of 61% (IndiGo at 37% and SpiceJet at
24%), thereby avg. HHI score Quartile 3 routes is 2x to that of Quartile 1 routes.
 Quartile 3 routes earn 53% higher avg. passenger yield over that of high competition Quartile 1 routes (Top 25%), and responsible for
SpiceJet’s FY17 RASK at 11% premium (at INR3.8) over its LCC competitor IndiGo.
 Notably, SpiceJet deploys 15% of its capacity on Quartile 3 (Top 50%-75%) routes, which is highest commitment of its capacity by any
airline.
HHI of operators on each Quartile Revenue per RPKM of SpiceJet higher than that of IndiGo
Average HHI
Routes
YoY Per 5.0
Category (in (INR)
vol Industry Jet Air Passenger
terms of PAX IndiGo SpiceJet Others
(%) HHI Airways India Price Yield
volume) 4.5
1st Quartile
22 3,081 3,332 3,040 2,959 2,961 2,748 2,457
(Top 25%) 4.0
Top 5% 15 2,725 2,845 2,752 2,726 2,640 2,491 2,487
5%-10% 31 2,928 3,212 2,931 2,815 3,587 2,601 2,585 3.5
10%-15% 31 3,163 3,440 3,039 2,758 1,784 2,940 2,259
15%-20% 23 3,641 3,845 3,496 3,775 5,804 3,135 2,471
3.0
20%-25% 25 4,302 4,710 3,682 4,275 1,493 3,676 2,299
Q3FY15
Q4FY15
Q1FY16
Q2FY16
Q3FY16
Q4FY16
Q1FY17
Q2FY17
Q3FY17
Q4FY17
Q1FY18
2nd Quartile 30 5,310 5,986 4,753 5,115 4,029 4,330 3,275
3rd Quartile 9 6,360 7,195 5,515 6,376 4,597 4,869 3,761
4th Quartile (31) 8,536 321 385 349 5,951 7,807 4,501
Indigo SpiceJet
Average 22 4,010 4,450 4,060 3,886 3,896 3,384 2,811
Note: Passenger Yield as on 30 July 2017 for 30 August 2017 journeys; Source: DGCA, Elara Securities Estimate Source: Company, Elara Securities Research

Market share retention given high order book
 SpiceJet placed firm order to purchase 55 Boeing-737-8-Max in 2014. In January 2017, airline increased its order size to 155, with an option
of purchasing 50 more that would expand the order book to 205, the second highest after IndiGo. During June 2017, SpiceJet placed
additional order of 20 Boeing 737 Max10s planes, and 50 Bombardier Q400 planes for regional connectivity scheme.
 It makes company’s ratio of order-book/current-fleet at 5.4 is also second highest, after Go Air, among domestic airlines.
 Thereby, we expect SpiceJet would retain its 13% market share and able to increase its share if its recent foray in govt. promoted Regional
Connectivity Scheme become success in few years.
SpiceJet reported strong growth in PLF Domestic market share – SpiceJet to retain its market share
35,000 (%) 94 50
(mn) (%)
30,000 92
90 40
25,000
88
20,000 86 30
15,000 84
20
82
10,000
80
5,000 10
78
0 76 0
ASKM RPKM PLF (RHS) Indigo SpiceJet Jet Airways


Brand building on the way
 Company has mostly resolved its legacy issues of near bankruptcy in FY15 by settling its dues with lenders, lessors and working capital
creditors, and focussing on re-negotiating leasing and maintenance terms to lower its costs by using advantage of its healthy order book.
 SpiceJet now targets its brand re-building through better customer experience via OTP.
 During FY17, SpiceJet’s OTP was highest among domestic airlines.
SpiceJet reported best OTP in FY17
85
(%)
80
75
70
65
SpiceJet Indigo Vistara Jet Airways Go Air Air India
FY17 OTP Performance

Source: DGCA, Company, Elara Securities Research

SpiceJet – Key financial and volume highlights
ASKM (mn) 14,541 12,916 16,438 20,024 24,591 29,035 21
RPKM (mn) 11,833 11,700 15,056 18,403 22,261 26,379 21
Load factor (%) 81 91 92 92 91 91 (0)
Revenue (INR mn) 52,431 50,881 61,913 80,062 98,998 1,15,438 23
EBITDAR (INR mn) 2,477 13,425 15,039 21,822 27,408 32,469 29
EBITDAR margins (%) 5 26 24 27 28 28 5
EBITDA (INR mn) (6,167) 5,314 5,433 9,775 11,334 12,815 33
EBITDA margins (%) (12) 10 9 12 11 11 8
Adjusted PAT (INR mn) (7,484) 3,861 3,922 8,094 10,045 11,729 44
EPS (INR) (12.5) 6.4 6.5 13.5 16.8 19.6 44
SpiceJet – Key operating metrics

Average USD/INR rates 61.1 65.4 67.1 64.9 65.0 65.0 (1)
Brent crude (USD/bbl) 86.0 47.7 48.5 53.8 55.0 55.0 4
Year-end fleet 32 43 51 63 73 84 18
Passengers Carried 12 12 15 18 22 25 20
Load factor (%) 81.4 90.6 91.6 91.9 90.5 90.9 (0)
Aircraft utilization (hrs/day) 7.8 9.8 9.6 9.5 9.5 9.5 (0)
ASKM (mn) 14,541 12,916 16,438 20,024 24,591 29,035 21
RPKM (mn) 11,833 11,700 15,056 18,403 22,261 26,379 21
RASK (INR) 3.6 3.9 3.8 4.0 4.0 4.0 2
Fuel exp/ASK (INR) 1.7 1.1 1.1 1.2 1.2 1.2 2
Aircraft and engine rentals/ASK 0.6 0.6 0.6 0.6 0.7 0.7 5
Employee expenses/ASK 0.4 0.4 0.4 0.4 0.4 0.4 (2)
Aircraft Maintenance/ASK 0.4 0.6 0.5 0.6 0.6 0.6 2
Selling expenses/ASK 0.2 0.1 0.2 0.2 0.2 0.2 (1)
Other expenses/ASK 0.8 0.7 0.6 0.6 0.6 0.6 (3)
CASK (INR) 4.1 3.6 3.5 3.5 3.6 3.6 1
CASK ex fuel (INR) 2.5 2.5 2.3 2.4 2.4 2.4 0
RASK-CASK (INR) (0.5) 0.3 0.3 0.5 0.5 0.4 15

Valuation
 We initiate SpiceJet with BUY rating at TP of INR170, ascribing 8.5x FY19E EV/EBITDAR. We ascribe 8.5X EV/EBITDAR multiple by assuming
5% premium over its global LCC peers up-cycle multiple of 8.1x (Ryanair and EasyJet) due to strong 29% EBITDAR CAGR during FY17-20E.
LCC peers valuation metrics

EBITDAR
CAGR (%)
Global LCCs
Ryanair 26,168 10.6 9.5 (8.0) 13.8 17.4 14.4 5.4 4.3 34.0 31.8 253 232
EasyJet 6,609 7.1 6.6 8.3 (8.5) 15.1 12.6 1.8 1.6 11.7 13.7 (10) 442
Average 8.9 8.1 0.2 2.7 16.2 13.5 3.6 3.0
SpiceJet valuation table

INR mn INR/share
Consolidated FY19E EBITDAR 27,408 46
EV/EBITDAR (x) 8.5
EV 233,106 389
Less: FY19E Aircraft lease rentals capitalized at 8.0x 128,593 215
Total EV 104,514 174
Less: FY18E Net debt 2,309 4
Equity value 102,204 170

 Every 5% increase in demand growth, improves TP by 34% and FY19E EPS by 42%.
 Every rupee strengthening by INR5/USD, improves TP by 35% and FY19E EPS by 42%.
 Every crude price weakening by USD5/bbl, improves TP by 26% and FY19E EPS by 31%
Risks: Rupee weakening, increase in crude prices, increase in competition, demand slowdown and adverse Court Judgment on case with Marans
23.0 23.0
45 60 20 65 111 157 203 45 60 (13) 29 71 112 154
45 65 (24) 22 68 113 159 45 65 (52) (11) 31 73 114
45 70 (68) (22) 24 70 115 45 70 (92) (51) (9) 33 74
55 60 (12) 34 79 125 171 55 60 (41) 1 42 84 126
55 65 Base Case (58) (13) 33 79 125 55 65 Base Case (83) (42) 0 42 83
55 70 (105) (59) (13) 33 78 55 70 (125) (84) (42) (1) 41
65 60 (44) 2 48 93 139 65 60 (70) (28) 14 55 97
65 65 (93) (47) (1) 45 90 65 65 (114) (73) (31) 11 52
65 70 (142) (96) (50) (4) 41 65 70 (159) (117) (75) (34) 8

Company description
 SpiceJet is the fourth largest airline carrier in Indian domestic airline industry. The company Key persons
has its headquarters in Gurgaon and its hub at New Delhi airport. SpiceJet follows a LCC  Mr. Ajay Singh (Chairman & Managing
model. Presently, it has committed to fly to 119 routes in India and has a fleet size of 55 Director)
which included 34 Boeing 737 and 21 Bombardier Q400. Mr. Ajay Singh (Promoter and  Mr. Kiran Koteshwar (CFO)
Managing Director) has been successful in the turnaround of the company when he acquired  Mr. R Sasiprabhu (Independent Director)
a controlling stake back in January 2015 from Mr. Kalanithi Maran. SpiceJet has the highest  Mr. Harsha Vardhana Singh (Independent
Passenger Load Factor (PLF) at 92% in the domestic airline industry in FY17 which helped in Director)
achieving better operational efficiency.  Mrs. Shiwani Singh (Promoter & Non-
Executive Director)
 Mr. Anurag Bhargava (Independent Director)

FY15 FY16 FY17 JetAirways Vistara
18.1 3.2
No. of Departures 102,615 95,755 115,207
SpiceJet Go Air
Hours 126,704 133,905 163,596 8.6
13.0 Public
Kms Flown ('000) 75,051 64,127 77,944 Air Asia
39.75
3.0
Fleet Size (No.) 32 43 51
Passenger carried (Mn) 11.7 11.9 14.9 Air India Mr. Ajay
13.6 Singh
ASKM (Mn) 14,541 12,916 16,438 60.25
Others
RPKM (Mn) 11,833 11,700 15,056
IndiGo 0.9
Load Factor (%) 81.4 90.6 91.6 39.7

Destinations map of SpiceJet
Kabul Srinagar
Jammu Dharamshala
Amritsar Chandigarh
Dehradun
Delhi Kathmandu
Jaipur
Lucknow Bagdogra
Guwahati
Sharjah Udaipur Varanasi
Allahabad
Dubai Bhopal Khajuraho Guangzhou
Riyadh Jabalpur
Ahmadabad Indore Agartala
Muscat Kolkata
Surat
Aurangabad
Mumbai Pune
Visakhapatnam
Hyderabad Rajahmundry
Belgaum Bangkok
Hubli Vijaywada
Goa
Bengaluru
Tirupati
Mangalore Chennai Port Blair
Mysore
Pondicherry
Tiruchirapalli
Kochi Madurai
Thiruvananthapuram Tuticorin
Colombo
Male

Key Financials
Net operating income 61,913 80,062 98,998 115,438 Operating cash flow 10,340 15,664 17,394 19,183
Aircraft fuel 18,552 23,254 29,716 34,266 Capex 2,163 2,000 2,000 2,000
Employee expenses 6,670 8,244 9,682 11,152 Free cash flow to firm 12,503 17,664 19,394 21,183
Other operating expenses 21,652 26,741 32,192 37,550 Investing cash flow (4,532) (3,145) (3,208) (3,108)
EBITDAR 15,039 21,822 27,408 32,469
Financing cash flow (414) (1,966) (1,378) (1,045)
Aircraft Lease Rentals 9,606 12,047 16,074 19,654
Net change in cash 5,394 10,553 12,808 15,029
EBITDA 5,433 9,775 11,334 12,815
Closing cash 2,012 12,565 25,373 40,402
Depreciation 1,986 2,189 2,351 2,531
EBIT 3,447 7,586 8,983 10,284 Ratio Analysis FY17 FY18E FY19E FY20E
Interest cost 650 746 615 492 Income Statement Ratios (%)
Other income 1,125 1,255 1,676 1,937 Revenue growth 21.7 29.3 23.7 16.6
PBT 3,922 8,094 10,045 11,729 EBITDAR growth 12.0 45.1 25.6 18.5
Less: Taxation 0 0 0 0 EBITDA growth 2.2 79.9 16.0 13.1
Effective tax rate (%) 0 0 0 0 Adj PAT growth 1.6 106.4 24.1 16.8
Adj PAT 3,922 8,094 10,045 11,729 EBITDARM 24.3 27.3 27.7 28.1
EBITDAM 8.8 12.2 11.4 11.1
Reported PAT 4,307 8,094 10,045 11,729
Adj net margin 6.3 10.1 10.1 10.2
Balance Sheet (INR mn) FY17 FY18E FY19E FY20E
Equity capital Return & Liquidity Ratios
5,995 5,995 5,995 5,995
Reserves (12,085) (3,991) 6,053 17,782 PBIT/Int 5.3 10.2 14.6 20.9
Total borrowings 10,282 8,974 8,136 7,500 Net debt/Equity (x) (1.4) (1.8) (1.4) (1.4)
Deferred taxes 0 0 0 0 ROE (%) NA NA 813.5 96.8
Other Liabilities 3,358 3,998 4,546 5,141 ROCE (%) 62.7 88.0 53.2 37.8
Total liabilities 7,550 14,976 24,729 36,419 Per Share Data & Valuation Ratios
Fixed assets 16,198 16,009 15,658 15,128 Diluted Adj EPS (INR) 6.5 13.5 16.8 19.6
Investments 1,398 1,398 1,398 1,398
Adj EPS growth 1.6 106.4 24.1 16.8
Inventories 870 956 2,712 3,163
Book value (INR) (10.2) 3.3 20.1 39.7
Debtors 618 1,113 1,069 1,335
DPS (x) 0.0 0.0 0.0 0.0
Cash 2,012 12,565 25,373 40,402
Loans & advances 4,906 6,351 7,807 9,223 P/E (x) 19.6 9.5 7.6 6.5
Other current assets 3,908 4,299 4,729 5,202 EV/EBITDAR (x) 5.6 3.3 2.1 1.3
Net current assets (14,095) (7,625) 1,271 12,383 Price/Book (x) (12.6) 38.3 6.4 3.2

JET AIRWAYS – STRATEGIC FIXES MISSING
JETIN IN Mcap: INR 65bn Accumulate
Jet Airways TP: INR 610 CMP: INR 573 Upside: 7%
Investment summary
 Weak balance sheet impacting growth in domestic market to ration resources on international market: Company’s balance sheet is weakest among listed
domestic peers at 1.5x Net Debt/EBITDAR in FY17. Company’s market share in international aviation among domestic players is stable at 39%, as company deploys more of
its incremental capacity on international routes over domestic market and thus lost domestic market share from 22% in FY15 to 18% in FY17. We believe Jet Airways’s less
focus on domestic market would led to its EBITDAR under-performance over IndiGo and SpiceJet during FY17-20E.
 Network positioning is weakest among domestic peers: Jet Airway’s deploys 36% of its capacity on Top 5% routes, which earns lowest passenger yields. Highest
exposure on Top 5% routes is due to inflexible nature of its FSC model, based on hub-and-spoke strategy and code sharing with international airlines.
 Strong domestic demand growth and stable fuel prices to help generate 13% FY17-20E EBITDAR CAGR: Though company’s FSC model is less competitive vs
that of LCCs, company would still benefit from overall domestic demand CAGR of 20% with stable crude oil prices, that would drive Jet Airway’s EBITDAR at 13% CAGR
over FY17-20E.
Valuation
We initiate Jet Airways with ACCUMULATE rating at TP of INR610, by ascribing 7.5x FY19E EV/EBITDAR. We ascribe EV/EBITDAR multiple, assuming 10% premium over global
FSC peers up-cycle multiple of 6.8x (China Eastern, China Southern and Air China), due to better EBITDAR growth.
Key risks
Rupee weakening, sharp increase in crude prices, increase in competition and global demand slowdown.
Financials
FY17 2,25,994 1.6 36,792 (19.4) 3,193 (66.2) 34.4 NA 14.8 16.7 3.0
FY18E 2,46,973 9.3 45,518 23.7 6,037 54.5 53.1 NA 24.2 10.8 2.1
FY19E 2,71,092 9.8 50,231 10.4 4,298 (28.8) 37.8 NA 22.7 15.1 1.6
FY20E 2,86,372 5.6 53,128 5.8 4,739 10.3 41.7 NA 20.8 13.7 1.2

40 50,000
35 (mn) (INR mn)
40,000
30
25 30,000
20
15 20,000
10 10,000
5
0 0

60,000 15,000
(INR mn) (INR mn)
50,000 10,000
40,000 5,000
30,000 0
20,000 (5,000)
10,000 (10,000)
0 (15,000)

Weak balance sheet impacting growth…contd.
 Company’s balance sheet is weakest among listed domestic peers at 1.5x Net-Debt/EBITDAR in FY17.
 Company’s market share in international aviation among domestic players is stable at 39%, as company deploys more of its incremental
capacity on international routes over domestic market and thus losing domestic market share from 22% in FY15 to 18% in FY17.
 We believe Jet Airways’s less focus on growing its domestic market share would led to its EBITDAR under-performance over IndiGo and
SpiceJet during FY17-20E.
Jet Airways has weakest balance sheet among peers Jet Airways continuously losing domestic market share
FY15 FY16 FY17 FY18E FY19E FY20E 80,000 25
Net Debt/Equity (mn) (%)
IndiGo 3.7 (0.4) (0.6) (0.9) (1.1) (1.5) 20
60,000
SpiceJet NA NA NA (1.8) (1.4) (1.4)
15
Jet Airways NA NA NA NA NA NA
40,000
EBIT/Interest Expenses
10
IndiGo 13.6 8.6 5.1 12.7 18.6 21.1
SpiceJet (4.5) 2.8 5.3 10.2 14.6 20.9
20,000
5
Jet Airways (1.2) 1.4 0.4 0.8 0.9 0.9
Net Debt/EBITDA 0 0
IndiGo 0.8 (0.2) (1.0) (0.9) (0.8) (1.1) FY15 FY16 FY17 FY18E FY19E FY20E
SpiceJet (2.3) 1.7 1.5 (0.4) (1.5) (2.6)
Jet Airways (27.2) 3.4 4.5 2.8 1.6 0.6 ASKM RPKM Domestic Market Share of Jet Airways (RHS)
Source: Company, Elara Securities Estimate Source: DGCA, Company, Elara Securities Estimate

…to rationalise limited resources to International market
 Jet Airways has signed firm order to buy 75 Boeing 737-Max aircraft in November 2015 to mostly replace its older fleet. Given Jet Airways’s
deploys major 60% of its ASKM in international market, available capacity from new aircrafts would be mostly used in international routes.
 Jet Airways ratio of order-book/current-fleet at 0.7 is lowest among domestic peers due to its stretched balance sheet, indicating company
would continuously lose its domestic market share at expense of retaining international market share.
Jet Airways order book to fleet size ratio is very weak Jet Airways International market share trend is stable
500 (nos) (x) 8 35,000 41
411 (mn) (%)
400 30,000
6 40
25,000
300 275
20,000
4 39
200 15,000
144
2 10,000 38
100 75
18 5,000
12 7 4
0 0 0 37
Indigo SpiceJet Jet Go Air Air India Air Asia Vistara Others FY15 FY16 FY17
Airways
Order Book OrderBook/CurrentFleetSize (RHS) ASKM RPKM Market share (RHS)

Network positioning is weakest among domestic peers
 Jet Airway’s deploys 36% of its capacity on Top 5% routes, which offers benefit of stable demand but earns lowest passenger yields.
 These routes also offer lowest growth potential due to runway constraints on major airports during peak hours.
 Company’s highest exposure on Top 5% routes is due to inflexible nature of its FSC model based on hub-and-spoke strategy and code
sharing with international airlines
Jet Airways has highest exposure in Top 5% vs peers Jet Airways HHI score is lower than industry
Share of routes on operator commitment 10,000 (INR) (Yield INR) 5,000
Routes YoY PAX Industry Jet Air
Category (%) PAX share
IndiGo SpiceJet
Airways India
Others 8,000 4,000
1st Quartile 6,000 3,000

Top 5% 15 38 26 19 36 26 28
4,000 2,000
5%-10% 31 17 15 17 15 12 16
10%-15% 31 11 11 9 8 12 13
2,000 1,000
15%-20% 23 8 8 10 11 7 6
20%-25% 25 6 7 4 2 6 6 0 0
2nd Quartile 30 15 20 19 16 21 18 Top 5% 5%- 10%- 15%- 20%- 2nd 3rd 4th
4 8 15 7 9 9
10% 15% 20% 25% Quartile Quartile Quartile
3rd Quartile 9
4th Quartile 0 1 4 5 4 6 4 Industry HHI Jet Airways Avg. Passenger Yield (RHS)
Source: DGCA, Elara Securities Estimate Note: Passenger Yield as on 30 July 2017 for 30 August 2017 journeys; Source: DGCA, Elara Securities Estimate

Capping demand growth opportunities
 Jet Airways has highest 36% of its capacity commitment on Top Jet Airways to under-perform on passenger growth
5% routes, which are expected to witness growth rate below
FY17-20
industry average, owing to slot constraints during peak hours at Passenger Growth (YoY) FY17 FY18E FY19E FY20E
CAGR (%)
major airports (Mumbai, Delhi and Bangaluru).
IndiGo 32 22 23 19 22
 We expect Jet Airways FY17-20E passenger CAGR would be just
SpiceJet 25 20 20 19 20
8% versus IndiGo’s 22% and SpiceJet’s 20%.
Jet Airways 5 8 8 7 8
Domestic Aviation Industry 22 18 23 19 20
Jet Airways highest capacity on low growth Top 5% routes to impact growth Jet Airways PLF is lowest among peers
Domestic Passenger growth rate Share of routes on operator commitment
Routes Category (in FY17- PLF FY17 FY18E FY19E FY20E
terms of PAX volume) FY17 FY18 FY19 FY20 20 IndiGo SpiceJet Jet Airways
CAGR
1st Quartile (Top 25%) 21.7 17.1 20.6 15.0 18 67.7 60.1 72.7 IndiGo 84.8 86.7 89.0 88.4
Top 5% 15.0 12.5 13.2 8.6 11 26.4 19.0 36.0
5%-10% 30.7 21.8 28.1 20.5 23 15.5 17.3 15.3
10%-15% 31.1 18.6 24.4 16.0 20 10.8 9.4 7.9 SpiceJet 91.6 91.9 90.5 90.9
15%-20% 23.4 22.4 26.1 16.8 22 8.2 10.2 11.3
20%-25% 25.0 23.1 27.7 28.0 26 6.8 4.3 2.3
2nd Quartile 29.8 26.2 33.8 33.6 31 20.3 19.4 16.3 Jet Airways 81.3 81.5 81.4 81.7
3rd Quartile 8.9 9.0 23.6 22.4 18 8.1 15.4 6.5
4th Quartile (30.6) (12.0) 19.2 20.1 8 3.9 5.0 4.4
Total 21.8 18.0 22.9 18.6 20 100.0 100.0 100.0
Source: DGCA, Elara Securities Estimate

Jet Airways – Key financial and volume highlights
ASKM (mn) 44,796 50,113 53,476 57,971 62,938 67,105 8
RPKM (mn) 36,846 41,299 43,485 47,242 51,217 54,804 8
Load factor (%) 82.3 82.4 81.3 81.5 81.4 81.7 0
Revenue (INR mn) 2,09,656 2,22,529 2,25,994 2,46,973 2,71,092 2,86,372 8
EBITDAR (INR mn) 18,141 45,642 36,792 45,518 50,231 53,128 13
EBITDAR margins (%) 8.7 20.5 16.3 18.4 18.5 18.6 4
EBITDA (INR mn) (3,584) 22,785 12,519 15,621 16,565 17,089 11
EBITDA margins (%) (1.7) 10.2 5.5 6.3 6.1 6.0 3
Adjusted PAT (INR mn) (21,014) 11,564 3,907 6,037 4,298 4,739 7
EPS (INR) (185) 102 34 53 38 42 7
Jet Airways – Key operating metrics

Average USD/INR rates 61 65 67 65 65 65 (1)
Brent crude (USD/bbl) 86 48 49 54 55 55 4
Year-end fleet 116 116 111 114 120 128 5
Passengers Carried 22.5 25.8 27.2 29.3 31.8 34.0 8
Load factor (%) 82.3 82.4 81.3 81.5 81.4 81.7 0
Aircraft utilization (hrs/day) 11.7 12.7 12.7 12.5 12.5 12.5 (1)
ASKM (mn) 44,796 50,113 53,476 57,971 62,938 67,105 8
RPKM (mn) 36,846 41,299 43,485 47,242 51,217 54,804 8
RASK (INR) 4.7 4.4 4.2 4.3 4.3 4.3 0
Fuel exp/ASK (INR) 1.6 1.1 1.1 1.1 1.2 1.1 1
Aircraft and engine rentals/ASK 0.5 0.5 0.5 0.5 0.5 0.5 6
Employee expenses/ASK 0.5 0.5 0.6 0.5 0.5 0.5 (4)
Aircraft Maintenance/ASK - 0.4 0.4 0.4 0.4 0.4 0
Selling expenses/ASK 0.5 0.5 0.5 0.5 0.5 0.5 (1)
Other expenses/ASK 1.6 1.0 1.0 1.0 1.0 1.0 (0)
CASK (INR) 5.0 4.2 4.2 4.2 4.2 4.1 (0)
CASK ex fuel (INR) 3.3 3.1 3.0 3.0 3.0 3.0 (0)
RASK-CASK (INR) (0.3) 0.3 0.1 0.1 0.1 0.1 16

Valuation
 We initiate Jet Airways with ACCUMULATE rating at TP of INR610, by ascribing 7.5x FY19E EV/EBITDAR. We ascribe EV/EBITDAR multiple,
assuming 10% premium over global FSC peers up-cycle multiple of 6.8x (China Eastern, China Southern and Air China), due to better
EBITDAR CAGR of 13% by Jet Airways.
FSC peers valuation metrics
EBITDAR
CAGR (%)
Regional FSC Carriers
China Eastern Airlines 12,878 8.1 7.7 1.9 10.8 8.5 8.7 0.9 0.9 10.8 9.8 18,386 19,777
China Southern Airlines 11,116 6.8 6.4 1.3 (19.9) 9.7 9.1 1.0 0.9 10.8 10.3 15,412 15,190
Air China 17,678 6.8 6.3 (11.0) 7.1 10.0 9.1 1.0 0.9 9.9 9.9 13,372 12,642
Average 7.2 6.8 (2.6) (0.7) 9.4 9.0 1.0 0.9
Jet Airways valuation table

INR mn INR/share
Consolidated FY19E EBITDAR 50,231 442
EV/EBITDAR (x) 7.5
EV 376,730 3,316
Less: FY19E Aircraft lease rentals capitalized at 8.0x 269,332 2,371
Total EV 107,408 946
Less: FY18E Net debt 38,065 335
Equity value 69,343 610

 Every 2.5% increase in demand growth, improves TP by 36% and FY19E EPS by 78%.
 Every rupee strengthening by INR2.5/USD, improves TP by 65% and FY19E EPS by 143%.
 Every crude price weakening by USD5/bbl, improves TP by 41% and FY19E EPS by 89%
Risks: Rupee weakening, sharp increase in crude prices, increase in competition and global demand slowdown
23.0 23.0
45 60 41 80 119 158 197 45 60 72 150 228 306 384
45 65 (26) 13 52 90 129 45 65 (67) 11 89 167 244
45 70 (94) (55) (16) 22 61 45 70 (206) (128) (50) 27 105
55 60 (1) 38 77 116 155 55 60 (14) 64 143 221 299
55 65 Base Case (70) (32) 7 46 85 55 65 Base Case (156) (78) 0 78 156
55 70 (140) (101) (62) (23) 15 55 70 (298) (220) (143) (65) 13
65 60 (44) (5) 34 73 112 65 60 (99) (21) 57 135 213
65 65 (115) (76) (37) 2 41 65 65 (244) (167) (89) (11) 67
65 70 (186) (147) (108) (69) (31) 65 70 (390) (312) (235) (157) (79)

Company description
 Jet Airways operates as a FSC with the second largest market share in domestic airline Key persons
industry at 18%. In the International market among Indian carrier, it stands second here  Mr. Naresh Goyal (Founder & Chairman)
also with 38% market share. It connects to 63 destinations (47-domestic and 16-  Mr. Gaurang Shetty (Whole Time Director)
international). It has its hub at Mumbai airport and also has an International hub at Brussels  Mr. Vinay Dube (Chief Executive Officer)
airport. Currently, it has a fleet of 113 aircraft which includes 76 Boeing 737, 10 Boeing 777,
 Mr. Amit Agarwal (Chief Financial Officer)
4 Airbus 330 and 18 ATR. It has a code share agreement with 20 airlines worldwide. It
 Mrs. Anita Goyal (Director)
acquired Air Sahara in 2007 and re-branded it as Jet-Lite, which operates as a LCC. Etihad
 Mr. Jayaraj Shanmugam (Chief Commercial
Airways acquired 24% stake in Jet Airways in 2013 for USD379mn that helped in reducing Officer)
debt.

FY15 FY16 FY17 Air Asia Air India
Go Air 3.0
Vistara 13.6
No. of Departures 202,708 224,488 225,938 8.6 Others
3.2 Others, 25
0.9
Hours 420,923 490,960 503,482
Kms Flown ('000) 110,233 132,100 132,862
Fleet Size (No.) 116 116 111 JetAirways Mr. Naresh
18.1 Goyal, 51
Passenger carried (Mn) 22.5 25.8 27.2
ASKM (Mn) 44,796 50,113 53,476 IndiGo
39.7 Etihad
RPKM (Mn) 36,846 41,299 43,485
SpiceJet Airways, 24
Load Factor (%) 82.3 82.4 81.3 13.0

Domestic Destinations Map of Jet Airways
Srinagar
Leh
Jammu
Amritsar Chandigarh
Dehradun
Delhi
Jaipur
Lucknow Bagdogra
Guwahati
Jodhpur Varanasi
Udaipur Khajuraho Imphal
Bhopal
Ahmadabad
Bhuj Indore Agartala
Rajkot Raipur Kolkata
Aurangabad Nagpur
Mumbai Pune
Visakhapatnam
Hyderabad Rajahmundry
Vijaywada
Goa
Bengaluru
Mangalore Port Blair

Tiruchirapalli
Kochi Madurai
Thiruvananthapuram
Colombo

Key Financials
Net operating income 2,25,994 2,46,973 2,71,092 2,86,372 Operating cash flow 21,151 26,964 30,697 29,419
Aircraft fuel 59,359 64,697 73,072 76,311
Capex (6,379) 3,000 3,000 3,000
Employee expenses 31,417 30,901 32,548 34,350
Free cash flow to firm 14,772 29,964 33,697 32,419
Selling and Distribution Expenses (INR mn) 25,333 26,622 29,222 30,869
Aircraft Maintenance 19,979 21,662 23,517 25,073 Investing cash flow 16,223 (4,613) (4,791) (4,411)
Other operating expenses 53,115 57,573 62,501 66,639 Financing cash flow (36,833) (8,650) (8,789) (8,901)
EBITDAR 36,792 45,518 50,231 53,128 Net change in cash 540 13,701 17,117 16,107
Aircraft Lease Rentals 24,273 29,896 33,665 36,039 Closing cash 15,422 29,123 46,240 62,347
EBITDA 12,519 15,621 16,565 17,089 Ratio Analysis FY17 FY18E FY19E FY20E
Depreciation 8,878 8,472 8,631 8,790
Income Statement Ratios (%)
EBIT 3,641 7,149 7,934 8,299
Interest cost 8,524 9,233 9,207 9,193 Revenue growth 1.6 9.3 9.8 5.6
Other income 8,074 8,122 5,570 5,632 EBITDAR growth (19.4) 23.7 10.4 5.8
PBT 3,191 6,037 4,298 4,739 EBITDA growth (45.1) 24.8 6.0 3.2
Less: Taxation (2) - - - Adj PAT growth (66.2) 54.5 (28.8) 10.3
Effective tax rate (%) (0) - - - EBITDARM 20.5 16.3 18.4 18.5
Adj PAT 3,193 6,037 4,298 4,739
EBITDAM 10.2 5.5 6.3 6.1
Reported PAT 3,907 6,037 4,298 4,739 Adj net margin 5.2 1.7 2.4 1.6
Balance Sheet (INR mn) FY17 FY18E FY19E FY20E Return & Liquidity Ratios
Equity capital 1,136 1,136 1,136 1,136 PBIT/Int 0.4 0.8 0.9 0.9
Reserves (50,135) (44,097) (39,800) (35,061) Net debt/Equity (x) (1.2) (1.0) (0.7) (0.3)
Total borrowings 72,233 72,795 73,172 73,409 ROE (%) NA NA NA NA
Deferred taxes 0 0 0 0
ROCE (%) 14.8 24.2 22.7 20.8
Other Liabilities 5,796 5,949 6,246 6,637
Total liabilities 29,030 35,783 40,755 46,121 Per Share Data & Valuation Ratios
Fixed assets 72,851 67,378 61,747 55,957 Diluted Adj EPS (INR) 34.4 53.1 37.8 41.7
Investments 12,614 13,245 13,907 14,603 Adj EPS growth (66.2) 54.5 (28.8) 10.3
Inventories 5,061 6,766 7,427 7,368 Book value (INR) (431.3) (378.2) (340.3) (298.6)
Debtors 13,762 16,495 18,145 18,578 DPS (x) 0.0 0.0 0.0 0.0
Cash 15,422 29,123 46,240 62,347
P/E (x) 16.7 10.8 15.1 13.7
Loans & advances 24,515 26,791 29,407 31,065
EV/EBITDAR (x) 3.0 2.1 1.6 1.2
Other current assets 1,811 1,901 1,996 2,096
Net current assets (43,820) (31,596) (20,992) (9,836) Price/Book (x) (1.3) (1.5) (1.7) (1.9)

SNAPSHOT OF OTHER MAJOR DOMESTIC AIRLINES
Air India
 Air India is a 100% ownership of Air India Ltd which is a Government of India enterprise. Key persons
Being India’s national carrier, it caters to 69 domestic and 37 international destinations. Air  Mr. Ashwani Lohani (Chairman and Managing
India is third largest airlines in India in terms of passenger carried. It has its primary hub is Director)
in New Delhi and secondary hub in Mumbai. Air India has a fleet size of 119 which includes  Mr. Vinod S. Hejmadi (Director-Finance)
44 Wide Body Aircraft (Boeing 777 & 747), 65 Narrow Body Aircraft (Airbus 319-321) and 10  Capt. Arvind Kathpalia (Director- Operations)
Regional Aircraft. Out of the 119 aircrafts, 70 are owned by Air India and the remaining 49  Mr. Pankaj Srivastava (Director- Commercial)
are on lease. The Boeing 777 and 747 cater to international operations while Airbus 319, 320
and 321 cater to domestic routes and some international routes as well.

18.1 3.2
No. of Departures 111,867 114,918 124,577
Go Air
Hours 193,478 204,182 224,895 SpiceJet 8.6
13.0 Air Asia
Kms Flown ('000) 106,240 123,661 123,820
3.0
Fleet Size (No.) 130 130 138
Passenger carried (Mn) 12.0 13.1 14.6 Air India
13.6
Government
ASKM (Mn) 15,229 15,811 17,147 of India
Others 100
RPKM (Mn) 11,726 12,477 13,515
IndiGo 0.9
Load Factor (%) 77.0 78.9 78.8 39.7

Go Air
 Go Air is a 100% subsidiary of Wadia Group and launched its operations in 2005 as a LCC. Its Key persons
has its primary hub at Mumbai and secondary hub at New Delhi. Presently, Go Air covers 23  Mr. Wolfgang Prock-Schauer (Chief
destinations in India. Go Air received permission from DGCA to commence its international Executive Officer, Managing Director and
Director)
operations in 2016 and has planned to fly to 9 international destinations. Its Fleet consists of
 Mr. Jehangir Nusli Wadia (Managing Director
19 A320Ceo and 5 A320Neo. Go Air has placed order for 144 A320Neo, out of which 5 have
and Director)
been delivered. It thus plans to have a fleet capacity of 100 aircrafts by March 2023.
 Mr. Sujit Cherian (Chief Financial Officer)
 Mr. Birender Ahluwalia (Chief Commercial
Officer)

18.1 3.2
No. of Departures 47,198 48,360 55,827
Go Air
Hours 87,834 89,060 99,913 SpiceJet 8.6
13.0 Wadia
Kms Flown ('000) 44,645 45,937 52,001 Air Asia
Group
Fleet Size (No.) 19 19 24 3.0
100
Passenger carried (Mn) 6.5 7.2 8.6 Air India
13.6
ASKM (Mn) 7,857 8,085 9,172
Others
RPKM (Mn) 6,218 6,765 8,067
IndiGo 0.9
Load Factor (%) 79.1 83.7 88.0 39.7

Vistara
 The Company is registered as Tata SIA Airlines Limited. It is a 51:49 Joint Venture between Key persons
Tata Sons and Singapore Airlines Limited. Vistara received Air Operator Permit on 14th  SIA- Swee Wah Mak (Vice-President of SIA)
December, 2014 from DGCA and commenced its operations from 9th January, 2015. Vistara,  Phee Teik Yeoh (CEO)
a FSC, has its hub at New Delhi. At present, it is covering 19 destinations and its fleet  Bhaskar Bhat (Chairman)
consists of 13 A320Ceo and 2 A320Neo. Vistara has planned to induct 5 more A320neo by
 Sanjiv Kapoor (Chief strategy and commercial
end of June, 2018 and thus increasing its fleet size to 20. Vistara has introduced a different officer)
segment namely, Premium Economy Class, which provides extra legroom and more recline  Niyant Maru (CFO)
than the economy class.

FY15 FY16 FY17 JetAirways
SpiceJet 18.1
No. of Departures 1,304 13,920 23,982 13.0 Vistara
Hours 1,981 20,666 40,724 3.2
Kms Flown ('000) 1,311 14,235 26,343 Singapore

Go Air Airlines
Fleet Size (No.) 5 9 15 8.6 Limited
Tata Sons
51
Passenger carried (Mn) 0.1 1.4 2.9 Air Asia 49
3.0
ASKM (Mn) 194 2,107 4,071 Air India
IndiGo
RPKM (Mn) 104 1,462 3,175 39.7 13.6
Others
Load Factor (%) 53.7 69.4 78.0 0.9

Air Asia
 Air Asia is a Joint Venture Between Air Asia India Investment Ltd. and Tata Sons Ltd. which Key persons
commenced its operations on 12th June, 2014 after receiving permission from DGCA. Its Hub  S Ramadorai (Chairman)
is located at Bangaluru. Presently it is covering 15 destinations which includes only Tier2 &  Tony Fernandes (CEO and Director)
Tier3 cities and plans to include metro city routes in future. Air Asia has a fleet of 11  PK Ghose (Director)
A320Ceo and plans to expand its fleet to 20 in the next 3-4 years.
 R Venkataramanan (Director)
 Tharumalingam Kanagalingam (Director)

FY15 FY16 FY17 JetAirways Vistara R. S.
18.1 3.2 Venkatara
No. of Departures 4,142 11,932 17,440 Ramadorai
Go Air manan 0.5
Hours 4,857 17,988 27,698 SpiceJet 8.6 1.5
13.0 Air Asia
Kms Flown ('000) 2,994 13,044 18,089
3.0 Air Asia
Fleet Size (No.) 4 6 11 Tata Sons
India
Passenger carried (Mn) 0.2 1.7 2.7 Air India Investment 49
13.6 Ltd
ASKM (Mn) 548 2,348 3,270
49
Others
RPKM (Mn) 417 1,883 2,799
IndiGo 0.9
Load Factor (%) 76.1 80.2 85.6 39.7

APPENDIX – I SPICEJET TURNAROUND STORY
SpiceJet – Turnaround story...contd.
Issues and Problems
 Chennai based Sun Group acquired SpiceJet in 2010 with investment of ~INR15bn for 58% stake in the hope of new equity infusion would revive profitability. However,
airline continued to make losses.
 During 2014, mounting losses resulted in SpiceJet to return planes. Airline also defaulted on fuel payments and other dues with regulator and creditors.
 DGCA, the regulator, as precautionary measure, prevented tickets booking from more than 30 days.
 By December 2014, the SpiceJet temporarily suspended operations.
Action and Turnaround
 Marans, Sun Group promoters, sold their stake in the airline to Mr Ajay Singh. Then, SpiceJet management proposed revival plan to the Aviation Ministry.
 The government supported the airline revival by instructing AAI and oil marketing companies to offer credit facilities to SpiceJet. DGCA also lifted 30 day ban on tickets sale.
Declining crude oil prices also helped turnaround.
 After normalizing the operations, the management focussed on brining back the trust among customers, like best airline on timeliness.
 To optimize cost, SpiceJet closed 5 domestic and 3 international loss making routes.
 Company initially offers discounts on tickets and then gradually reduces offer periods with ramp-up in passenger volume.
Recent developments
 In January 2015, Mr Maran and his KAL Airways transferred their entire stake in SpiceJet to Mr Singh. As per the terms of the deal, Mr Maran and KAL Airways would
receive 189 mn convertible warrants in exchange for INR3.3bn money to the airline for payment of taxes and liabilities. Mr Maran paid INR6.8bn
 Later on Mr Kalanithi Maran has filed case in Delhi High Court over non-issuance of convertible warrants that was part of the deal for passing of their ownership to Mr Singh
in January 2016.
 In July 2017, the Delhi High Court dismissed directed SpiceJet to deposit INR5.8bn as regards share transfer dispute with Mr Kalanithi Maran. Court has instructed SpiceJet
to deposit the entire amount in instalments over 12 months period.
Elara Securities (India) Private Limited Aviation : India Will Fly

APPENDIX – II INDIGO A320NEO P&W ENGINE ISSUE
IndiGo- A320 Neo Engine Issue…contd.
Issues and Problems
 IndiGo started receiving delivery of new A320 Neos from its 2011 order but engine issues (technical snags) which as led to slowdown in delivery and lower
daily utilization of these aircrafts.
 Due to delay in planned delivery of A320Neos, IndiGo was forced to extend the operating lease of 24 aircrafts which resulted in increased maintenance and
lease rental expenses. Moreover, company has increased its work force on anticipation of A320Neos delivery, which resulted in increase in unutilized
employee cost.
 Aviation regulator (DGCA) has instructed a detailed investigation of the A320 Neos, whose engines manufactured by Pratt & Whitney (P&W), received till
date. Both Airbus and P&W have offered technical and operational support to IndiGo by providing spare engines, to help manage the operations.
 DGCA conducted preliminary examination and concluded key reason for engine issue has been with one of the bearings in the engine apart from those
related to combustion system. Subsequently, P&W has given an assurance that the problem would be completely resolved by September 2017.
 IndiGo, being the launch customer for A320 Neo, has ordered total 430 aircrafts from Airbus. These aircraft powered by fuel efficient engines are a key to
the low cost model as they are 15%-20% fuel efficient.
Pratt and Whitney Engine Issue
 The Pratt and Whitney (PW 1100 G-JM Geared Turbo Fan) Engine that are used for Airbus A320Neos for IndiGo and Go Air orders are facing technical issues
since their first delivery in 2016.
 So as a proactive measure with focus on passenger safety, DGCA has increased the frequency of engine scrutiny. The airlines would be required to conduct
the technical examination of the new engine every 1000 hours of fly from induction versus 1500 hours previously, and then every 500 hours of flying that
would negatively impact the daily utilisation of aircraft.
 However, IndiGo is confident that this issue would be solved during this fiscal, as it believes any new technology engines faced similar technical issues in the
initial stage in the past that were solved with time.
Elara Securities (India) Private Limited Aviation : India Will Fly

APPENDIX – III AIR INDIA PRIVATIZATION IMPACT
Air India Privatization Impact…contd.
History
 In 2007, the UPA Government formulated merger of Air India and Indian Airlines to harness financial and operational synergy.
 In 2011, they were merged but the anticipated synergies was not appeared and the financial performance worsened.
 In 2012, Government bailout Air India under a financial restructuring and turnaround plan, under which Air India received equity infusion of
INR223 bn from the central government till now.
Today status and future scenario
 Presently, Air India has gross debt of INR520 bn and continuously making losses since more than past 10 years, despite INR223 bn support
from Government. The domestic market share of Air India has shrunk to 13.6% in 2017 from 16.2% in 2011.
 Thereby, Government has decided to privatize the airline.
 Air India has a fleet size of 120 aircrafts (second largest after IndiGo among domestic carriers) and connects 70 domestic and 37 international
destinations. The airline has a massive ground handling infrastructure along with major land bank and assets in prime locations, implying it
has significant value from non-core resources.
 We believe Air India’s privatization has potential to bring out a major change through efficiency improvement, especially in the work culture
typical of a margin and growth focussed private enterprise from presently a Public Sector Unit culture.
 With management control in private hands, airline network strategy also expected to be re-jigged, where airline is expected to reduce its
frequency on non-profitable or low PLF routes and would increase tariffs with market reality, implying benefit to other domestic airlines.

contd…Air India Privatization Impact
IndiGo’s Interest – International operations, the cream of Air India
 Post Government’s indication, IndiGo had shown interest to buy the national carrier.
 But they later clarified in subsequent conference call that they are only interested to purchase the International operations of Air India,
including its international low cost division – Air India Express, rather than the whole operations.
 They also mentioned that they need clarity on Air India’s debt, as they would not give commitment for whole debt.
 IndiGo indicated that they are keen on this strategy as they want to strengthen their international operations, but any new airline cannot
organically built major international operations due to non-availability of incremental slots in major hubs globally. Thereby, acquisition is the
only way to build international business. Air India, whose has build its international network since past more than 70 years is the best
opportunity for any new entrant to ramp-up its international operations on long-haul routes.

APPENDIX – IV NATIONAL CIVIL AVIATION POLICY, 2016
National Civil Aviation Policy, 2016…contd.
Target
 The NCAP has a target of achieving 300mn domestic passengers annually by 2022, 500million domestic passengers and 200million international passengers
annually and 10million tonnes of cargo volume annually by 2027.
Advantage India:
 A rapidly growing economy with more than 300 million middle class population.
 India has an ideal location between the western and the eastern hemisphere.
 Current world rank of 10th in terms of total passengers carried.
UDAN - Ude Desh ka Aam Naagrik
 Government’s aim is to make affordable and convenient flying for the average Indians especially on regional routes through Regional Connectivity Scheme
(RCS).
 The Policy states an Indicative fair of INR2500 for distance of around 500-600kms (equivalent to 1 hour of flight). Hence, to achieve this, concessions will
be required by Central & State Governments and Airport operators. The above fair would be indexed to inflation.
 There would also be revival of under-served and un-served airports/routes. The revival of these airports would be done at an indicative cost of INR500-
1000mn, without insisting on its financial liability.
 State governments would provide the land free of cost for construction of airport along with multi model hinterland connectivity (rail, road, etc.) as
required
 State Governments would also provide police and fire services free of cost. Utilities like power & water would be provided at concessional rates.
 RCS will be made operational only in those States which reduce VAT on Aviation Turbine Fuel (ATF) at these airports to 1% or less for a period of 10
years.

contd…National Civil Aviation Policy, 2016
Leniency on international rights and route dispersal guideline
 Rule 5/20 (5 years domestic operations experience and minimum 20 fleets) will now be replaced by 0/20 (0 years domestic operations
experience and minimum 20 fleets) for internationals operations approval. Hence, a new Airline would now be able to commence its
international operations along with its domestic operations if they have a minimum of 20 aircrafts.
 Route dispersal guideline would rationalized. Category I routes (high volume routes) will be rationalised once in five years, by adding more
routes based on transparent criteria. The criteria proposed for a Cat I route are a flying distance of more than 700 km, average seat factor of
more than 70% and annual traffic of 0.5mn passengers over two full schedules (i.e. summer and winter). Ministry of Civil Aviation (MoCA) will
endeavour that the rationalization of Cat I routes does not cause undue financial and operational burden on airlines and sufficient time will be
provided to them for adjusting their future schedules.

APPENDIX – V ROUTES QUARTILES
Quartile 1- Routes (Top 25%)
Routes Category
Top 0-5% Top 5-10% Top 10%-15% Top 15%-20% Top 20%-25%
MUMBAI-DELHI BENGALURU-HYDERABAD BHUBANESWAR-DELHI MUMBAI-LUCKNOW BENGALURU-VISAKHAPATNAM
BENGALURU-DELHI BENGALURU-KOLKATA BENGALURU-GOA DELHI-CHANDIGARH DELHI-UDAIPUR
BENGALURU-MUMBAI BENGALURU-PUNE KOLKATA-AGARTALA MUMBAI-INDORE BENGALURU-TRIVANDRUM
KOLKATA-DELHI DELHI-PATNA KOCHI-DELHI KOCHI-CHENNAI DELHI-RAIPUR
MUMBAI-GOA DELHI-GUWAHATI HYDERABAD-VISAKHAPATNAM DELHI-INDORE MUMBAI-COIMBATORE
DELHI-PUNE MUMBAI-KOCHI DELHI-BAGDOGRA VADODARA-MUMBAI DELHI-NAGPUR
DELHI-CHENNAI HYDERABAD-CHENNAI COIMBATORE-CHENNAI KOLKATA-BAGDOGRA BHUBANESWAR-MUMBAI
DELHI-HYDERABAD KOLKATA-CHENNAI DELHI-JAIPUR AHMEDABAD-BENGALURU GOA-HYDERABAD
MUMBAI-CHENNAI KOLKATA-GUWAHATI MUMBAI-NAGPUR MUMBAI-MANGALORE HYDERABAD-TIRUPATI
MUMBAI-HYDERABAD MUMBAI-JAIPUR BENGALURU-KOCHI MUMBAI-UDAIPUR AHMEDABAD-HYDERABAD
AHMEDABAD-MUMBAI BENGALURU-CHENNAI DEHRA DUN-DELHI MADURAI-CHENNAI JAMMU-SRINAGAR
DELHI-LUCKNOW DELHI-VARANASI DELHI-RANCHI KOLKATA-PORT BLAIR MUMBAI-RAIPUR
AHMEDABAD-DELHI DELHI-SRINAGAR KOLKATA-HYDERABAD PORT BLAIR-CHENNAI VADODARA-DELHI
DELHI-GOA AMRITSAR-DELHI DELHI-JAMMU BENGALURU-JAIPUR BHUBANESWAR-KOLKATA
MUMBAI-KOLKATA CHENNAI-PUNE MUMBAI-CHANDIGARH KOCHI-HYDERABAD AHMEDABAD-CHENNAI

Quartile 2- Routes (Top 25%-50%)
MUMBAI-VARANASI BENGALURU-CHANDIGARH JAIPUR-PUNE HYDERABAD-RAIPUR HYDERABAD-INDORE
AHMEDABAD-PUNE CHENNAI-TRIVANDRUM KOLKATA-LUCKNOW KOLKATA-DIBRUGARH BENGALURU-RANCHI
MUMBAI-RAJKOT NAGPUR-PUNE HYDERABAD-VARANASI CHENNAI-TIRUCHIRAPALLY JAIPUR-CHENNAI
GUWAHATI-IMPHAL DELHI-VISAKHAPATNAM MUMBAI-AURANGABAD MUMBAI-PATNA DELHI-IMPHAL
MUMBAI-TRIVANDRUM KOLKATA-JAIPUR GUWAHATI-CHENNAI BENGALURU-COIMBATORE KOLKATA-DIMAPUR
BENGALURU-GUWAHATI BHUBANESWAR-BENGALURU HYDERABAD-RAJAHMUNDRY BENGALURU-VIJAYAWADA BENGALURU-VARANASI
BHUBANESWAR-HYDERABAD KOLKATA-IMPHAL BENGALURU-PATNA GOA-PUNE AIZAWL-KOLKATA
HYDERABAD-PUNE BHOPAL-DELHI GUWAHATI-AGARTALA KOCHI-PUNE MUMBAI-RANCHI
DELHI-TRIVANDRUM MUMBAI-Calicut MUMBAI-VISAKHAPATNAM GOA-CHENNAI CHANDIGARH-SRINAGAR
DELHI-LEH BENGALURU-LUCKNOW KOLKATA-PUNE AMRITSAR-MUMBAI MUMBAI-DEHRA DUN
BENGALURU-MANGALORE KOLKATA-PATNA DELHI-JODHPUR KOLKATA-SILCHAR GUWAHATI-BAGDOGRA
COIMBATORE-HYDERABAD COIMBATORE-DELHI BHUJ-MUMBAI RANCHI-PATNA HYDERABAD-LUCKNOW
BHOPAL-MUMBAI AHMEDABAD-GOA MUMBAI-GUWAHATI BENGALURU-NAGPUR KOLKATA-NAGPUR
AHMEDABAD-KOLKATA HYDERABAD-JAIPUR DELHI-SURAT DELHI-VIJAYAWADA KOLKATA-RAIPUR
CHENNAI-VISAKHAPATNAM HYDERABAD-VIJAYAWADA MUMBAI-JODHPUR KOLKATA-VISAKHAPATNAM CHENNAI-TUTICORIN

AHMEDABAD-JAIPUR KOCHI-TRIVANDRUM BENGALURU-BELGAUM BENGALURU-Calicut Calicut-DELHI
MUMBAI-JAMMU GUWAHATI-SILCHAR MUMBAI-PUNE BAGDOGRA-CHENNAI HYDERABAD-TRIVANDRUM
KOLKATA-GOA DELHI-AURANGABAD INDORE-NAGPUR HYDERABAD-MANGALORE HYDERABAD-PORT BLAIR
DELHI-DHARAMSALA MUMBAI-JAMNAGAR BHUBANESWAR-CHENNAI HYDERABAD-AURANGABAD BHUBANESWAR-VARANASI
KOLKATA-RANCHI LUCKNOW-PATNA MUMBAI-JABALPUR GUWAHATI-HYDERABAD LEH-SRINAGAR
DELHI-JABALPUR KOLKATA-VARANASI MUMBAI-BELGAUM BENGALURU-MADURAI IMPHAL-AGARTALA
DELHI-PORT BLAIR AHMEDABAD-LUCKNOW JAIPUR-UDAIPUR BENGALURU-BAGDOGRA BHOPAL-RAIPUR
CHENNAI-VIJAYAWADA HYDERABAD-MADURAI DIBRUGARH-GUWAHATI VADODARA-BENGALURU DELHI-MADURAI
GOA-INDORE MUMBAI-MADURAI DELHI-GORAKHPUR KOLKATA-JORHAT KOLKATA-KOCHI
DELHI-DIBRUGARH BENGALURU-RAIPUR DELHI-ALLAHABAD CHENNAI-RAJAHMUNDRY GUWAHATI-JAIPUR
INDORE-PUNE KHAJURAHO-VARANASI KOLKATA-INDORE HYDERABAD-JABALPUR DELHI-RAJKOT
MUMBAI-SRINAGAR DELHI-GAYA DELHI-TIRUPATI LUCKNOW-PUNE CHENNAI-RAIPUR
AIZAWL-GUWAHATI DELHI-AGARTALA AMRITSAR-SRINAGAR DELHI-MANGALORE HYDERABAD-CHANDIGARH
INDORE-RAIPUR Calicut-CHENNAI HYDERABAD-NAGPUR VIJAYAWADA-VISAKHAPATNAM GUWAHATI-JORHAT
BENGALURU-INDORE AHMEDABAD-KOCHI MUMBAI-BAGDOGRA JAMMU-LEH KOLKATA-COIMBATORE

BHUBANESWAR-VISAKHAPATNAM BENGALURU-AGARTALA KOLKATA-GAYA GUWAHATI-LILABARI KOCHI-CHANDIGARH
AGATTI ISLAND-KOCHI DEHRA DUN-HYDERABAD GUWAHATI-GOA BENGALURU-JODHPUR COIMBATORE-AGARTALA
DELHI-KULLU CHANDIGARH-CHENNAI Calicut-KOCHI HYDERABAD-UDAIPUR DELHI-DURGAPUR
AGARTALA-CHENNAI KOLKATA-TRIVANDRUM BHUJ-DELHI DEHRA DUN-CHENNAI MANGALORE-BELGAUM
BHAVNAGAR-MUMBAI INDORE-CHENNAI GOA-VARANASI BENGALURU-RAJKOT BELGAUM-JABALPUR
BENGALURU-HUBLI KOLKATA-SHILLONG VADODARA-KOLKATA AMRITSAR-CHENNAI NAGPUR-RAIPUR
MUMBAI-DIU DELHI-PANTNAGAR VADODARA-HYDERABAD KOLKATA-UDAIPUR AIZAWL-AHMEDABAD
DELHI-DIMAPUR MUMBAI-SURAT GOA-LUCKNOW AHMEDABAD-NAGPUR PUNE-SRINAGAR
Calicut-TRIVANDRUM DELHI-KHAJURAHO AGRA-VARANASI AMRITSAR-BENGALURU AGRA-DELHI
AHMEDABAD-GUWAHATI BENGALURU-RAJAHMUNDRY AIZAWL-IMPHAL IMPHAL-PUNE KOLKATA-DURGAPUR
MUMBAI-GWALIOR BENGALURU-SRINAGAR KOLKATA-CHANDIGARH KOCHI-PORT BLAIR AGATTI ISLAND-BENGALURU
HYDERABAD-BAGDOGRA VADODARA-CHENNAI BHUBANESWAR-COIMBATORE GAYA-VARANASI GOA-SRINAGAR
PORT BLAIR-VISAKHAPATNAM AHMEDABAD-COIMBATORE MUMBAI-AGARTALA AGRA-KHAJURAHO
AIZAWL-DELHI BENGALURU-DEHRA DUN MANGALORE-CHENNAI BENGALURU-JORHAT
BENGALURU-IMPHAL GOA-PATNA RAIPUR-VISAKHAPATNAM HYDERABAD-AGARTALA

Abbreviation
Term Description
ASKM Available Seat-Kilometer
ATF Aviation Turbine Fuel
CASK Cost per Available Seat-Kilometer
DGCA Directorate General of Civil Aviation
Earnings before finance income and cost, tax, depreciation,
EBITDAR
amortization and aircraft and engine rentals
FSC Full Service Carrier
LCC Low Cost Carrier
MoCA Ministry of Civil Aviation, Government of India
MRO Maintenance Repair and Overhaul
OTP On Time Performance
PAX Number of passengers carried by airline
PLF Measure of passenger capacity utilization
RASK Revenue per Available Seat-Kilometer
RCS Regional Connectivity Scheme
RPKM Revenue Passenger Kilometer
UDAN Ude Desh ka Aam Naagrik
UDF User Development Fee

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Gagan Dixit | gagan.dixit@elaracapital.

com | +91 22 6164 8504

Los Angles Times, March 2017

Elara Securities (India) Private Limited Aviation : India Will Fly 2

Snapshot of Other Major Domestic Airlines………………………………………… 73

Elara Securities (India) Private Limited Aviation : India Will Fly 3

Elara Securities (India) Private Limited Aviation : India Will Fly 4

Elara Securities (India) Private Limited Aviation : India Will Fly 5

Regional FSC Carriers

Note: pricing as on 23 August 2017; Source: Bloomberg, Elara Securities Estimate

Elara Securities (India) Private Limited Aviation : India Will Fly 6

ASKM Trend CAGR 10.62% 80

0-10% GDP Growth 10%+ GDP Growth Total Domestic

Elara Securities (India) Private Limited Aviation : India Will Fly 8

We estimate Trips per capita CAGR of 18% over FY17-22E

Elara Securities (India) Private Limited Aviation : India Will Fly 9

2.0 13,000 0.25

Elara Securities (India) Private Limited Aviation : India Will Fly 10

Trips per capita

Trips per capita

Elara Securities (India) Private Limited Aviation : India Will Fly 11

(10) Kolkata-New Delhi 131 128 380 132 169

Elara Securities (India) Private Limited Aviation : India Will Fly 12

Elara Securities (India) Private Limited Aviation : India Will Fly 13

 Assessment of current under-capacity status

Elara Securities (India) Private Limited Aviation : India Will Fly 15

20,000 Over Capacity Zone

ASKM YoY growth Under capacity

Elara Securities (India) Private Limited Aviation : India Will Fly 16

Elara Securities (India) Private Limited Aviation : India Will Fly 17

 Our supply-demand balance model noted AU at under-capacity zone since FY16.

6 Over Capacity Zone

YoY hours utilized growth trend Under capacity

Elara Securities (India) Private Limited Aviation : India Will Fly 18

mean. Source: DGCA, Airline Companies, Elara Securities Research

Mumbai Delhi Bangaluru

Elara Securities (India) Private Limited Aviation : India Will Fly 19

International ASKM growth is in balanced zone International PLF too…

Elara Securities (India) Private Limited Aviation : India Will Fly 20

Elara Securities (India) Private Limited Aviation : India Will Fly 22

Elara Securities (India) Private Limited Aviation : India Will Fly 23

Elara Securities (India) Private Limited Aviation : India Will Fly 25

Chandigarh 26 Coimbatore (5)

Elara Securities (India) Private Limited Aviation : India Will Fly 26

Smaller carriers proactive on slot addition in Delhi

Jet Airways 1,239 1,389 150

Elara Securities (India) Private Limited Aviation : India Will Fly 27

Share of routes on operator commitment

Routes Category (in terms of YoY PAX volume

Elara Securities (India) Private Limited Aviation : India Will Fly 29

Elara Securities (India) Private Limited Aviation : India Will Fly 30

Routes classification as per served by no. of airlines

Served by 1-2 91 49 46 39 41 36 46 38 28 27 175 63 4,033

Elara Securities (India) Private Limited Aviation : India Will Fly 31

Elara Securities (India) Private Limited Aviation : India Will Fly 32

Elara Securities (India) Private Limited Aviation : India Will Fly 34

Elara Securities (India) Private Limited Aviation : India Will Fly 35

Elara Securities (India) Private Limited Aviation : India Will Fly 36

Elara Securities (India) Private Limited Aviation : India Will Fly 37

Elara Securities (India) Private Limited Aviation : India Will Fly 38

Elara Securities (India) Private Limited Aviation : India Will Fly 39

Elara Securities (India) Private Limited Aviation : India Will Fly 40

IndiGo – Key operating metrics

Elara Securities (India) Private Limited Aviation : India Will Fly 41