Strong mkt leadership, robust demand should help IndiGo stock gain altitude

India is expected to see close to 10 per cent CAGR in passenger volumes over next two-three years and it is among the lowest penetrated markets per capita despite being the third-largest

India’s civil aviation sector has strong growth trends in the medium to long term, but geopolitics has had a short-term impact on international travel. Many flights were cancelled during the Iran-Israel conflict and there are fears of crude supply disruptions, causing price volatility to a key input. In addition, the crash at Ahmedabad has led to Boeing 787 fleets being grounded, causing further flight disruptions and it has also led to Air India being badly hit due to 787 exposures.

 

India is expected to see close to 10 per cent compound annual growth rate (CAGR) in passenger volumes over the next two-three years and it is among the lowest penetrated markets per capita despite being the third-largest. The number of working airports has risen to 162 from 74 in 2014, with plans to develop another 50 airports in the next few years. Supply chain issues and technical hurdles have slowed aircraft deliveries from Boeing and Airbus to 5-6 years (from earlier 3-4), which has led to demand-supply gaps.

 

IndiGo (InterGlobe Aviation) is a gainer in terms of market share while the longer-term trends for Indian aviation seem quite favourable. There’s been steady growth in passengers, and scaleup in the network of airports and routes. Overall domestic passenger volumes grew by around 9 per cent Y-o-Y between February-April 2025, though metro-metro traffic declined 2 per cent Y-o-Y due to a crunch in aircraft availability. IndiGo has also grown international volumes by 30 per cent Y-o-Y over January-April 2025. While there are fleet expansion plans, there may be delays in aircraft deliveries. 

 

In effect, the data indicates that Indian civil aviation is now an oligopoly with IndiGo far ahead of the number two, Air India group. IndiGo’s market share improved following the collapse of GoFirst in May’23. IndiGo has held over 60 per cent ever since and it had 64.6 per cent share in May ’25 up 300bp Y-o-Y, while the share was 26.5 per cent for Air India group (down 250bp Y-o-Y), 5.3 per cent for Akasa (up 50bp Y-o-Y), and 2.4 per cent for SpiceJet (down 160bp Y-o-Y).

 

The passenger load factor was at 85.1 per cent for IndiGo (down 330bp Y-o-Y), 80.2 per cent for Air India group (down 670bp Y-o-Y), 91.4 per cent for Akasa (up 110bp Y-o-Y), and 84 per cent for SpiceJet (down 10bp Y-o-Y). On-time performance was averaged at 69 per cent at the top six airports with 84 per cent for IndiGo, 74.7 per cent for Air India, 78.7 per cent for Akasa, and 50.1 per cent for SpiceJet.

 

As of now, air turbine fuel (ATF) price for June ’25 was at ₹83,073 per kilolitre (down 13 per cent Y-o-Y and down 3 per cent month-on-month (M-o-M). For Q1FY26, ATF price stood at ₹86,000, while it was ₹93,767 for Q4FY25, down 7 per cent quarter-on-quarter (Q-o-Q) and 13 per cent Y-o-Y. This is benign pricing trends – fuel contributes close to 40 per cent of operating costs. Lower ATF prices should increase margins considerably, but this could change if conflicts lead to sustained price spikes.

 

Globally, IndiGo is among the most efficient low-cost air carriers in terms of CASK (Cost per available seat km) and in FY25, it reported a 17 per cent Y-o-Y increase in revenue, driven by 11 per cent Y-o-Y rise in passenger volumes. 

 

Ebitda grew 11 per cent Y-o-Y, despite higher forex loss on rupee depreciation, increase in lease expenses, grounded aircraft and higher airport fees. In FY25, the company added 67 aircraft to the fleet, taking total count to 434. Management guided for double-digit capacity growth in FY26.

 

There’s reason to maintain a positive outlook due to the robust sector demand, the strong market leadership and the growing domestic and international network. The stock trades at a PE of around 25x based on expected FY26 earnings and it could receive a valuation boost if growth continues as per schedule.

 

According to Bloomberg, 7 of the 8 analysts polled in June are bullish on the stock. Their average on-year target price is ₹6,192 versus the current price of ₹5,691.