Home / Markets / Mark To Market /  IndiGo’s yields continue to fly high

InterGlobe Aviation Ltd, which runs IndiGo, appears to have maintained the momentum in its yields, a measure of pricing. Analysts at Kotak Institutional Equities recently interacted with the airline’s management, where IndiGo had said that yields are much better than what seasonal trends in a weak September quarter (Q2FY23) would imply.

“As per Indigo, this reflects growing comfort of customers to pay it more than 5 yield and of competition following Indigo as it takes up pricing," said analysts at Kotak in a report on 22 August. In Q1, this measure was at 5.24, up from 4.40 in Q4FY22.

“International yields for IndiGo have started to exceed domestic yields in spite of the longer stage length," added the Kotak report.

The traction in yields is also supported by steady demand. The average number of daily fliers in August-to-date stood at about 326,000 versus 316,000 in July, point out analysts at ICICI Securities in a report dated 22 August.

Also, these healthy yields are likely to sustain in FY24 given the limited capacity additions for Indian airlines, IndiGo had pointed out in its interaction with analysts at Kotak. The airline also highlighted that there are constraints for aeroplane manufacturers to supply more aircraft to the world.

To be sure, increasing competition is a key risk to IndiGo’s market share, which stood at 58.8% in July. Though there is no immediate threat, entry of other airlines would mean higher competitive intensity in the longer run.

“In domestic, IndiGo is taking cognizance of new/old airlines coming in and is also aiming to counter customer feedback coming in of IndiGo’s service becoming ‘robotic’. While IndiGo will focus on making changes to its domestic offering in the near term, it is also working towards the changes in international as it starts flying more long-distance journeys 18 months from now," added the Kotak report.

IndiGo’s shares have done well in the past one year, rising by 18.6%. Even so, they are nearly 17% below 52-week highs.

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