Following the news of the bankruptcy of Go First, India’s top-most budget airline IndiGo, jumps up the market shares by 6 per cent.
The morning trade of 3rd May; revealed more robust yields for InterGlobe Aviation which operates the IndiGo Airlines.
The sudden declaration of bankruptcy is both a surprise and a shock to the rivals of the Wadia group-owned airline.
The financial crunch of Go First saw the stocks of SpiceJet and IndiGo escalating, whereas the Central Bank of India faced a setback in the morning trade on Wednesday.
The National Stock Exchange (NSE) quoted Rs. 2175.25 at 9:30 AM Wednesday for the InterGlobe Aviation. Amid huge volumes, this was noted as a 5% substantial rise in shares than the previous market close.
The average of 20 days volume for IndiGo lay at 465,706 shares. However, the Go First bankruptcy saga led to significantly higher trading volume of IndiGo to 1,519,928 shares.
IndiGo and Tatas have a clear advantage in the Airlines Sector for a long term. IndiGo carries an impressive niche and track record, and also exhibits promising developments for the Industry. On a whole, the Airline Industry is now depicting a clear monopoly.
IndiGo stock now displays a “buy” rating, and each share has a target price of Rs 2700.
The domestic market has presented IndiGo with the opportunity to take advantage of the crisis. Anyhow, IndiGo had already been improving its competitive position in the Airlines Sector.
Rakesh Gangwal, the co-founder of IndiGo Airlines, holds a 16 per cent share in the company, as noted on March 2023. The Gangwals have been slowly trimming their stakes, while last year witnessed a 20 per cent gain over the IndiGo stocks.
The Rahul Bhatia-owned IndiGo Airlines has Rs 2,450 target price per share, and the stock rating reads “outperformed,” as per the latest record.
Along with more vigorous yields, IndiGo is all set to enjoy escalating leverage with Original Equipment Manufacturers (OEMs) of planes and engines globally.
As noted in February this year, IndiGo Airlines are on a mission to introduce 500 new jets and are in discussion with the plane manufacturers.
IndiGo is now likely to top up the scores with the most significant shares in the market owing to the downfall of Go First.
In March2023, Go First had a share of 6.9 per cent in the market. However, this was already seen downsizing as compared to the CY22 and CY19, in which it held 8.9 per cent and 10.7 per cent market shares, respectively.
Go First had voluntarily filed for bankruptcy before the National Company Law Tribunal (NCLT) on 2nd May. The reason for the insolvency was declared to be the supply of faulty engines by Pratt and Whitney.
Due to a critical shortage of cash, the Airline also halted its operations temporarily on the 3rd and 4th of May; Kaushik Khona, CEO of Go First declared.
Moreover, the domestic supply of Go First also suffered a brutal hit. It is presumed that roughly 9 per cent of the collection is deemed to be removed.
The competitive intensity is likely to be reduced due to the shutdown of operations of Go First. Besides, the market disruption could also benefit airfares, by and large, amid the growing traffic trends.
In India, post Covid -19 lockdowns and the economy’s revival, Air Traffic has been booming. The statistics of April 30 show a record-breaking transport of 4,56,082 passengers by the Indian Airlines in a single day. It is more than what the country used to notice before the Coronavirus lockdown, such as in the month of February 2020.
Now, in the midst of the capacity-constrained environment and the surging air traffic, India is set to behold a passenger transport of more than 500,000 in a single day by the end of 2023.
Proofread & Published By, Naveenika Chauhan