New Delhi: The impending stake sale by Indigo ex promoter Rakesh Gangwal besides slowing earning trajectory in 2Q is likely to weigh on Indigo’s stock price, JM Financial Institutional Securities said in a report.

Indigo’s ex promoter Rakesh Gangwal sold 5 per cent stake in the company via a block deal.

This is in line with his strategy to reduce stake in the company over the coming years. Gangwal’s stake post the recent sale stands at 25 per cent.

Passenger traffic for the aviation sector in July 2023 marginally declined by 3.0 per cent MoM to 12.1mn. August 2023 passenger traffic run rate implies 12.1mn flat MoM.

Last reported domestic PLF for July 2023 witnessed a decline in MoM across airlines with Indigo’s PLF at 83.7 per cent (-7.2ppt MoM) while Air India’s PLF stood at 84.2 per cent (-4.0ppt MoM).

Indigo continued to gain market share during July 2023 with its share now at 63.4 per cent (63.2 per cent in June 2023). Indigo has also increased focus towards international operations with discussion with Boeing to place an order for 25 wide body aircrafts, as per media reports and 174 new weekly international flights between June – September 2023 to cater to the rising demand for international travel.

Yields for airlines are witnessing a significant decline in 2Q given a seasonally strong base with airfares down 12 per cent QoQ (as per JM fare tracker).

Further, recent rally in crude price is likely to result in marginally higher ATF prices for airline companies during 2Q, the report said.

PLF’s for the quarter are also expected to decline from 1Q avg of 90.3 per cent with spot PLF’s averaging 85 per cent.

Go-first’s revival has slowed down post Delhi high court’s order to allow aircraft leasing companies to access the aircraft leased to Go First for inspections and maintenance work.

This has resulted in the airline’s new management (under the resolution professional) from failing to raise funds from banks due to questions over availability of aircraft, the report said.

Indian airlines’ engine woes continue to deepen with phased inspection of engines by P&W on account of microscopic cracks due to a rare condition in the powdered metal used for production. Indigo expects five aircrafts to be adversely impacted due to phased inspection of P&W engines