InterGlobe Aviation - Indigo


(Alok Bhola) #121

OAG’s list of the 20 busiest domestic flight routes also had the Bengaluru-New Delhi flight path, this one in the 11th position.

Another Indian name to make it to the OAG’s ranking was IndiGo. The airline was ranked fourth on the research firm’s list of ‘mega airlines’ sorted by their on-time performance.


(django) #122

(SMondal15) #123

Does anyone have any news on whether Indigo is goinv for GE made LEAP 1A eninge in place of troubled P&W one for NEO?

LEAP 1A is reliable Air India and Vistar is operating on it.

Fuel efficient engine and fuel hedge/atf import is answer to raising ATF.Average Q3 ATF price indigo reported was Rs 56/L it is now trading at around avg Rs 65/L as per IOC starting from Feb.

Not invested but waitinb for better entry.Really interested by traffic growth and supply constraint.


(Alok Bhola) #124

(Bhambri3) #125

They will not opt for leap engines. They have very good contracts with PW and if you look back all the new aircraft’s and new engines initially have problems and it takes good time to solve them.

As far as people those who are thinking that Leap engines don’t have any problem is because there are not many leap engines being used and not flying as much as Neos.

Indigo didn’t have much problems for first 12-15 months apart from engines taking time to start. After a while all such problems come up and then manufacturers have to modify parts accrodingly.

So we will have to wait and see for leap engines, if they really have any problems or not.

Disc : Invested


#126

(ap_21) #127

Looks like flights on the major routes are cancelled including Delhi.

Will this benefit other carriers like Spicejet and Jet Airways? Not sure, if they can plan additional flights on these routes.


(Bhambri3) #128

No other airline has aircraft’s to add additional capacity and all of them are flying their aircraft’s to max limit in a day.


#129

(vivtho) #130

Normally I’d agree with you that all new engines have problems in their initial days. However, knowing that this is the first new engine developed by P&W in more than 20 years means that P&W does not have any institutional knowledge to resolve this quickly.

The industry does have much faith in P&W’s capability to fix this soon. The consensus seems to be that the situation will get worse for a while before it gets better.

Disc: No longer invested.


(Aman Goklani) #131

Well, well, well…

Not sure if this is good or bad. Prima facie I think it’s for the good. Any acquisition comes with its own set of headaches and skeletons. I’m sure AI’s would have been a migraine!

Disc: Invested


(atul1082) #132

I too feel buying whole of AI by anyone Indian company would be too heavy and draining as it would come with a set of conditions like retailing huge manpower etc.Indigo has taken the right decision by opting out of it


(Maunil) #133

I think the process has just started. And despite Indigo denying to buy whole of AI, they will be interested in getting into a arrangement with some other player, where they carve out the international biz and sell off the domestic operations to the JV partner post sale process.


(noddy123) #134

Indigo has recently forayed into buying commercial real estate. This was an article that was posted recently. Is this investment to further their airline business or is it a completely different foray. Any views on this would be appreciated please.


(Aman Goklani) #135

I believe that is Interglobe Enterprises. The holding company of Interglobe Aviation. Interglobe Enterprises controls / owns many businesses across sectors including Interglobe Aviation. Don’t really think the real estate foray has anything to do with Indigo. Unless of course Indigo starts loaning money to the holding company for this foray.

I guess at the moment the only source of income to Interglobe Enterprises from Indigo is way of dividends (and any equity dilution).

https://www.interglobe.com/Home/About

https://www.interglobe.com/Business/Loadview


(sarangg) #136

It’s hard to underwrite constant profitability in an industry with commodity outputs and low barriers to entry. Thus margins are likely to be cyclical depending on airline capacity supply, especially more so because of the low marginal cost. On top of that, you have the crude oil cycle which introduces volatility/leverage risk. I would differ from you and say Indigo is probably overvalued at those metrics, as above average growth in a sector usually attracts new entrants which

  1. decreases OPM for everyone due to aggressive pricing
  2. decreases incremental sales growth for incumbents

Given these risks, globally airline companies are valued at mid to high single digit P/E’s. Ask yourself - if running an airline is usually a 12% RoE business and you can start flying to India and earn 60% RoE, do you think those margins are sustainable?


(sumit680) #137

I have used DCF model for evaluating Indigo. I have made following assumptions-
|Assumed FCF Growth||

|Year 1-3|15%|
|Year 4-6|10%|
|Year 7-10|5%|
|Discount Rate|12%|

With such assumptions, the current stock price seems fairly valued. However, after reading about the management and the larger presence and aircraft holding, i feel a discount rate of 12% might be too harsh.
A reduction of discount rate to 10% will show the stock to be 10% undervalued…

Disc- a novice investor…invested in Indigo.


(s) #138

Indigo has an upside opening up to International route. FCF and efficient management is going to be helpful if implemented to expand its operating domain


(atul1082) #139

I beg to differ on some of yr points.Interglobe has been making profit since inception, passed through various commodity cycles ie crude increase also with profitability .EBITA margins are the highest in industry, 40%market share and ride through the cycle as they HV the ability to raise prices several times during the year.Non aeronautical revenue and profit is the highest in the industry.Best negotiating skills with suppliers and therefore have survived in this difficult industry, where entry is highly cost intensive and risky.Therefote it’s a unique play.
Disc:invested


(sumit680) #140

I agree with Atul. Management has the advantage of huge no. of aircrafts bought at a lower price. With more no. of aircrafts. they have the ability to provide more no. of flights between two stations. This in turn enable them to sch a flight at odd timing (early mornings) but quite cheaper than spice jet and other competitors.