I'm invested in INDIGO airlines and own 60% in my portfolio. The below calculation is only part of my weekend's work and doesn't show my intention to buy/hold/sell the stock.
Actual Numbers are from DGCA and projections are purely guess (No rational thinking)Analysis.xlsx (13.0 KB).
Notes/Assumptions : No one accurately guess / predict the future growth/issues. But my thoughts
1.49% FDI limit if increased can increase the. competition.
2. If fuel prices increase they wiil dent the profits in a huge way.
3. Any 9/11 kind of attack can significantly frighten people to travel through air.
4. New Aircrafts which are more fuel efficient and reduce the significant operating costs.
5. A320s with capacity around 180 seats may not be viable for remote areas because of smaller air strips or no infrastructure in remote areas. If smaller air crafts are used they will increase the operating cost.
6. Any other carriers can copy the business model of "sale lease back" business.
7. My Ability to weigh any of the above factors or any other factors which I couldn't foresee.
My Strong Convictions
1. Oil prices may go up or down, but fuel efficient aircrafts (supposedly 15% reduction in fuel costs with A320 neos) will provide the cushion with which Indigo Airlines can gain significant market share and whatever profit made by Indigo will be greater than the whole Industry. (Already this is proven according to management's previous claims).
2. Airbus A320 Neos may be delivered this year or next year I don't care as long as they are fuel efficient than the entire fleet of other airlines.
3. There are questions regarding the management stripping of the company from their retained earnings just before IPO, but my strong belief is management is going to give huge dividends going forward too. If not I feel definitely decrease my holding.
4. India is a vast country which still requires lot of flights and my personal belief is airline industry is growing atleast 10% and will grow atleast 15% for the next couple of years, will eventually normalize to 10% growth.
5. Cash in Hand in Indigo is the difference between Indigo and other carriers as of now. Existing listed carriers are having huge debts in their books.
6. Even if others copy the business model of sale/lease back it is highly difficult to scale up and beat Indigo in their own business.
7. I believe Indigo has become the virtual monopoly with pricing strategy but if Government /CCI resorts to pricing caps then it's detrimental to business.