Clear sky ahead: IndiGo set to gain further altitude in the long-run

IndiGo leads with its operational metrics, including on-time performance, aircraft utilisation, and cost efficiencies such as a fuel-efficient fleet and streamlined network optimisation

InterGlobe Aviation, the operator of IndiGo airline, holds dominant domestic market share, with around 65 per cent of India’s aviation market. The Indian aviation industry is witnessing rapid expansion. Domestic air travel is set to double by 2030 (CY30) to 510 million (from 242 million in FY25) due to macro-trends like rising middle-class incomes, and the government policy favouring airport infrastructure development. India could also be the fifth-largest outbound tourist market by 2027.

 

IndiGo, as the market leader, should be best positioned to capitalise on these trends. While maintaining dominance in the domestic market, it is growing its international presence. It has one the largest aircraft orders in global aviation history, with 925 aircraft deliveries due by 2035. This includes the A321 XLR for mid-haul and A350 widebody for long-haul routes.

 

The airline leads in its operational metrics, including on-time performance, aircraft utilisation, and cost efficiencies such as a fuel-efficient fleet and streamlined network optimisation. It is also expanding non-ticket revenue sources, including IndiGo Stretch (business class seating), BluChip (loyalty programme), and its growing cargo division.

 

IndiGo posted ₹79,500 crore in total income for the 12 months ending CY24, with 18 per cent year-on-year (Y-o-Y) growth. Profit after tax (PAT) at ₹6,100 crore showcases its strengths, despite global headwinds. The company has a good balance sheet, with free cash reserves tripling since March 2020. This provides a safety net against shocks and supports fleet expansion.

 

IndiGo aims to double its size by CY30, targeting a fleet of 600+ aircraft and 200 million passengers annually. Future fleet expansion includes A350-900 aircraft deliveries starting CY27, ensuring long-term international growth. It is also shifting toward direct agent engagement to enhance customer reach and sales efficiency while implementing AI-driven solutions to enhance customer experience, employee efficiency, and operational processes. 

 

In FY26, IndiGo expects low double-digit Y-o-Y capacity growth, supported by over one aircraft delivery per week in CY25. It served 106.7 million customers in FY24, with a net increase of 63 aircraft. The company had eight strategic partners with a 27 per cent international share in terms of available seats per kilometre (ASK) in FY24 – it hopes to grow this to 40 per cent by CY30.

 

IndiGo also has among the lowest costs per ASK globally, excluding fuel and forex at around $3.37 (October 2023–September 2024). Cost improvement is set to continue as IndiGo is exploring in-house MRO (maintenance, repair and overhaul) options with centres in Bengaluru and Delhi. It is also going to reconfigure 40 aircraft (from 14) to include business class seats to improve yields.

 

In the short term, the ongoing January-March quarter (Q4) of FY25 is likely to be better than earlier guidance due to strong passenger growth (up 17 per cent Y-o-Y). Management expects IndiGo’s passengers at 118 million in FY25 (up 11 per cent YoY). Given the moderation in oil prices, spreads are likely to expand.

 

IndiGo’s future plans imply a strong international presence, which seems achievable, given a large diaspora, rising outbound tourism, and India’s strategic location for developing as an aircraft hub. International passengers are expected to more than double by 2030. It has already started damp-leasing larger aircraft to prepare for this expansion overseas. This would diversify earnings across currencies, also creating a buffer against currency and fuel fluctuations.

 

Pilot availability is stable, while digitisation is being revamped rapidly. However, there are concerns about the speed of order fulfilment as there could be prolonged delays in aircraft delivery. Air India’s CEO has suggested that the global aircraft shortage will continue for 4-5 years, while Boeing is projecting a run rate of two aircraft per month for Indian carriers (Air India, Akasa). So, this could be a roadblock to expansion plans. The stock’s current valuations are rich at an estimated 20 times the projected FY26 earnings.

 

According to Bloomberg, 9 of the 13 analysts polled in March are bullish on the stock; one has a ‘sell’ rating, while the rest are ‘neutral’. Their average one-year target price for the stock is ₹5,313.