INTERGLOBAL AVIATION

STOCK PRESENTATION
Airlines sectors
Market shares –SEPT 2023 TYPES OF AIRLINES
Rest
Akasa Air LOW COST CARRIERS
Vistara
Air Asia
SERVICE
IndiGo
Go Air
SpiceJet
FULL SERVICE CARRIERS
A

0 10 20 30 40 50 60 70

In the global aviation sector, the success of low-cost carriers like Ryanair and
Southwest Airlines highlights their wealth-creating potential. IndiGo, operating in India's RELIGIONAL
price-sensitive and cyclical aviation market, has successfully embraced the low-cost
model. The industry's challenges, driven by fixed revenues due to price sensitivity and
the cyclicality of fuel costs, have led to bankruptcy cases like Kingfisher and Jet ROUTES DOMESTIC
Airways. IndiGo's resilience stems from a robust balance sheet and strategic decisions,
showcasing the importance of financial stability and sound business strategies in
navigating the complexities of the aviation industry
INTERNATIONAL
KEY PLAYERS
Airlines sectors
KEY RISKS
Topic #0 fuel price fluctuation risk fuel labor costs disruptions increased supply operating
strikes losses prices
Topic #1 debt liquidity risk obligations ability conditions liquidity limit operating future
economic control covenants
Topic #2 cost and revenue risk costs competitive operating regulation agreements
substantial maintenance security incur data
Topic #3 reputation risk systems harm failure technology operate attacks terrorist heavily
automated rely
Topic #4 information technology risk costs insurance key personnel operating dependent
government regulations coverage suppliers
Topic #5 volatile stock fluctuation risk stock price market economic stockholders
conditions control fluctuate interruptions volatile
Topic #6 crash and accident risk partners reputation share event code limited growth
harmed accident major
Topic #7 partnership risk third party negatively service services providers delays assets
united regional

GROWTH TRIGGRED MOMENTUM

stock momentum

• Passenger: Increasing disposable income, low cost carriers, government company 1 years 6 months 3 months 1 months 1 week ltp
policies, increasing tourism, infrastructural development
Domestic seat per capita 0.13 there is lot of growth is remaining , it
interglobal aviations 2125 2565 2489 2987 2899 3100
growing 2x GDP and the foreign international seat per capita 0.06 which
momentum 46% 21% 25% 4% 7%
also is very less . Expecting 12-14% growth
• Cargo: Rise in ecommerce, government initiatives encouraging
manufacturing and export, increasing congestion at ports, aircraft jet airways 70 56 58.25 57.91 55.15 54.1
passenger capacity expansion leading to more cargo belly, rising trade with moemtum -23% -3% -7% -7% -2%
other nations Emerging Trends
• Better regional connectivity2 : The government launched the UDAN spicejets 35 31 37 59 64 71
scheme six years ago for the development of regional air networks. 450+ momentum 103% 129% 92% 20% 11%
routes across 70 regional airports are now operational
Airlines sectors

SUPPLY CHAIN ANALYSIS A

Aircraft ENGINNERING Fuel Suppliers: Airlines REVENUE

Manufacturers: Companies like Boeing source aviation fuel from Aircraft operations
and Airbus manufacture
Companies like Boeing oil companies. In India, • Gate operations • Ticket
the airplanes used by
and Airbus major suppliers include counter ops • Onboard
Indian airlines They
manufacture the Indian Oil Corporation, services • Baggage
provided option to use
airplanes used by enginee like CRM-leap Bharat Petroleum, and handling • Ticket
Indian airlines. and pratt and whitney GTF Hindustan Petroleum office/websitecounter ops
• Onboard services •
Baggage handling • Ticket
PETER FIVE FORCES ANALYSIS office/website

THREAT OF NEW ENTRANT
•Low risk generally due to
huge capital outlay,
stringent regulations, oil
price volatility & high exit
costs
• High risk presently from
recent entrants Akasa Air,
Tata backed Vistara &
AirAsia India, regional
operators like FlyBig and
the revival of Jet Airways
Bargaining power of costumers
• High as airline services are
increasingly becoming
commoditized leading to
low switching costs
• Indian demography is
price sensitive, thus brand
loyalty is low
• Regulations on ticket
pricing in the past further
constrained the margins
Bargain power of suppliers
• High as there is little to no
control over fuel price and
also labor costs due to
associations like ICPA
• Moderate power of aircraft
manufacturers as while the
space is extremely
concentrated it is also very
competitive
Threat of subsitute product
• Low-moderate risk for long
distance travel as limited
quick alternatives •
Moderate risk for short
distance travel due to
transport via fast trains •
High risk from the advent of
remote work solutions
eliminating the need for
travel altogether
Rivlary against the other players
• High competing pressure
owing to low product
differentiation and high exit
costs • Recently, losses
from COVID-19 have further
put pressure on airlines to
increase asset utilization
levels; pricewars in an
expensive oil market have
led to slim margins
Airlines sectors – quant analysis

key matrics valuations

PARTICULAR 2018 2019 2020 2021 2022 2023
particulars indigo air india spicejet go air P/E 43.1 619.2 -389.2 -16.6 -15.7 -305
CASH P/E 35.6 105.2 82.6 20.3 -66.83 -68.5
RASK 4.76 4.2 5 3.1
P/BV 4 3 2.1 2.4 6 3.6
CASK 4.79 4.4 5.7 2.9 EV/EBITDAR 13 14 18 17 34.2 14.44
RASK-CASK -0.03 0.2 0.7 0.2 DIVIDEND
CASK-FUEL 2.7 1.056 2.622 0.841 YIELD 1.6 0 0 0 0 0
PASSANGER LOAD FACTOR (ASK/RPM) 82% 66.50% 80.30% 75.1 FCF YIELD 6.8 4.5 4.3 -9 -9 6.6
PASSANGER TRAFFIC 49.8M 15.0M 9.2M 4.4M FCF PER SHARE 132 133 183 -177 -185 -154

unit economics and common size for fy22

particulars industry avg industry avg % indigo spicejet go air vistara air india

rask 3.75 100% 100% 100% 100% 100% 100%

cask 3.56 95% 95% 114% 94% 92% 112%
fuel 1.58 42% 35% 46% 29% 39% 24%
aircraft rental 0.06 2% 0% 10% 3% 1% 2%
employee expenses 0.51 14% 14% 12% 13% 12% 12%
landing fees 0.22 6% 8% 12% 16% 0% 10%
repair and maintaince 0.65 17% 24% 18% 29% 34% 17%
comission 0.02 1% 0% 2% 0% 5% 5%
others 0.52 14% 14% 14% 4% 2% 33%

operting margins 0.19 5% 5% -14% 6% 8% -2%

Airlines sectors
• Macro Points :
(1)Expansion in Aviation Infrastructure, an estimated INR 35000 crore is expected to be
Invested
(2) IATA is forecasting a gain of an additional 359 million passengers
(3) Crude prices remain STABLE which will allow for better cost management
(4) Corporate tax cut will further improve PAT margins
• Indigo is almost entirely secured from any contingency associated in the Airlines business viz. crude oil Price rise. Also it even benefits to an extent from rise in
crude price, as other fragile airlines weakens, itcan capture additional market share; it has almost 65% market share, never ever has any airline inr ecent decades
has reached such a milestone in any part of the world , also 20000 crores cash reserve gives a lot of cushion in an industry where 20 % of revenue is said to be a
good contingency reserve. A lot of cash has been maintained to be in a ready position to buy AirIndia’s low cost international operations, which can provide it
ready access to lot of new International destinations, if a suitable deal is possible.
• Pratt & Whitney engine problem – 60% of neo aircraft which were facing issues had changed both the engines and others at least have one modified engine,
so they seems to be in a good position to comply with DGCA and FAA guidelines
• Asset light & buys planes only for 6 years on an operating lease - get a huge savings in maintenance capex which is a significant cost, always places large plane
orders >100 to get a good bargain from the supplier; track record of prudent capital allocation by management
Airlines sectors - technical
Airlines sectors - PROXY

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MARKET CAP -2.3T$ MARKET CAP -8998 CR

Market cap -132B$
Sales growth –42% Sales growth – 85%
Sales growth – 2.75%
Operating Margins –4% Operating Margins –44%
Operating Margins –11.15%
Net margin – 1% Net margin – 34
Net margin –4%
Profit growth – (50%) Profit growth – 25%
Profit growth –-38.75
PE-5.26 PE-55.26
PE-42

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Market cap -117B$ Market cap -127B$

Sales growth – 12.68% Sales growth – 6.94%
Operating Margins – 18.23 Operating Margins –5.39
Net margin – 7.32 Net margin –(7.41%)
Profit growth – 0.81 Profit growth – (17.44%)
PE-29.25 PE-NA