Shares of IndiGo and SpiceJet rose nearly 3% on Tuesday after domestic air passenger traffic in India crossed the 5,00,000 mark in a single day for the first time on November 17, 2024. The milestone underscores the burgeoning demand for air travel, driven by the festive and wedding season.
Market response
By 10:23 AM, IndiGo’s shares were up 2.57% at ₹4,081 on the BSE, while SpiceJet’s shares gained 2.38% to trade at ₹57.12. In comparison, the BSE Sensex was up 1.02% at 78,129.49, indicating strong investor confidence in the aviation sector.
Passenger traffic milestone
On November 17, airlines carried 5,05,412 passengers, setting a new record for single-day domestic air traffic. There were 3,173 flight departures, reflecting the increasing connectivity and demand in India’s aviation sector.
The surge in passenger numbers can be attributed to the peak festive and wedding season, which typically sees a significant uptick in travel.
Year-on-Year growth
In September 2024, domestic air passenger traffic rose 6.38% year-on-year (Y-o-Y), with Indian carriers transporting 1.30 crore passengers, compared to 1.22 crore in the same period last year.
- IndiGo, India’s largest carrier, captured a 63% market share in September, reflecting its dominant position.
- Air India, backed by the Tata Group, saw its market share climb to 15.1%.
- Akasa Air carried 5.73 lakh passengers, accounting for a 4.4% market share, while SpiceJet transported 2.61 lakh passengers, with its share dropping to 2%.
Passenger experience and challenges
Despite the impressive growth, the data released by the Directorate General of Civil Aviation (DGCA) also highlighted operational challenges.
- Flight Cancellations:
- 48,222 passengers were impacted by cancellations in September 2024.
- Airlines spent ₹88.14 lakh on compensations and facilities for affected passengers.
- Flight Delays:
- Delays affected 2,16,484 passengers last month, prompting airlines to allocate ₹2.4 crore towards assistance.
- Denied Boarding:
- Airlines paid ₹75.08 lakh in compensation to 756 passengers who were denied boarding.
Aviation stocks outperform
Over the past year, aviation stocks have outperformed the broader market:
- IndiGo’s stock has surged 51.2%, driven by its robust market share and operational efficiency.
- SpiceJet shares have gained 46%, reflecting renewed investor interest despite operational and financial challenges.
- In comparison, the BSE Sensex has risen 17.5% during the same period.
Key drivers of growth
- Festive and Wedding Season:
Seasonal demand has significantly boosted air traffic, particularly in the second half of the year. - Increased Connectivity:
The addition of new routes and improved regional connectivity have played a crucial role in expanding domestic air travel. - Rising Affordability:
Competitive pricing and enhanced services have made air travel more accessible to a wider population.
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- Strong Market Leaders:
IndiGo’s extensive network and operational efficiency, combined with Air India’s resurgence under Tata’s ownership, have contributed to the sector’s overall growth.
Future outlook
The record-breaking passenger numbers on November 17 highlight the resilience and potential of India’s aviation industry. As the sector continues to recover from the challenges posed by the pandemic, airlines are focusing on expanding their fleet, improving customer service, and enhancing operational efficiency.
With a growing middle class, increased urbanisation, and rising disposable incomes, the demand for air travel in India is expected to remain robust. Airlines are also poised to benefit from government initiatives aimed at boosting regional connectivity under the UDAN scheme.
For investors, the aviation sector presents a promising opportunity, as evidenced by the strong performance of IndiGo and SpiceJet stocks over the past year. However, the industry must address operational inefficiencies, such as delays and cancellations, to sustain long-term growth and profitability.
As domestic air traffic continues to soar, industry stakeholders will look to capitalise on this momentum, ensuring that India remains one of the fastest-growing aviation markets globally.
