IndiGo rises 2%; analysts expect ancillary service fee hike to aid margins

According to reports, IndiGo has hiked charges for various ancillary services, including infant travel and unaccompanied minors.

IndiGo share price today: Shares of InterGlobe Aviation, the parent company of the country's largest airline IndiGo, rose on Friday after the company increased charges for several optional and special services.

 

IndiGo shares opened higher at ₹4,925 and extended gains to hit an intraday high of ₹4,943.30, up 2 per cent, on the BSE.

 

Analysts said the development comes at a time when airlines are facing cost pressures due to surging oil prices. While this is a positive development for the company and could help the airline offset part of the higher operating costs and support its margins, they said that the hikes will make certain add-on services more expensive for passengers.

 

 

“That is a positive. When oil prices have gone up so much, this will provide marginal relief to profitability," G Chokkalingam of Equinomics Research said.

 

As of 10:15 AM, IndiGo shares traded 1.6 per cent higher at ₹4,926, emerging among the top gainers on the Sensex pack. CHECK Stock Market LIVE Updates

 

In comparison, the benchmark Sensex was up 0.25 per cent at 74,502.

 

According to reports, IndiGo has hiked charges for travel of infants, unaccompanied minors and excess baggage, among other services. For infant travel on domestic flights, the charge has been increased to ₹3,000 from ₹2,200. The amount varies on international routes. READ MORE

 

Kranthi Bathini, director, equity strategy at WealthMills Securities, said that IndiGo is the largest airline in India, with a dominant market share of more than 65 per cent. The development is unlikely to impact the airline’s passenger demand, given its strong market position.

 

“IndiGo is the market leader, and aviation remains one of the growing sectors in India despite high crude oil prices. The increase in excess baggage and infant fares will help the airline generate additional revenue and provide some support to profitability,” he said.

 

Currently, IndiGo has more than 430 planes and operates nearly 2,200 flights daily. 

Jefferies keeps 'Buy' on IndiGo Meanwhile, Jefferies, in a note, said that IndiGo management at the India Forum highlighted near-term industry rationalisation, with airlines prioritising profitability over growth through the current period of uncertainty. The management has kept the capacity growth flattish Y-o-Y for 2Q and PRASK guidance unchanged around 25 per cent.

 

On the recent fare hikes, the management said that it would support medium-term revenue quality and reiterated the FY30 growth guidance, with strong volume growth expected from FY28 onwards.

 

Jefferies has reiterated its 'Buy' rating on IndiGo, with a target price of ₹5,840, implying an upside of 20 per cent from the previous close of ₹4,854.

 

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