PL Capital on Aviation: Domestic Traffic Slows to 1.9% in May 2025; IndiGo Stays Resilient, BUY Maintained
- 26th June 2025
- 04:00:00 PM
- 3 min read
Mumbai | June 26 – Domestic aviation traffic increased by just 1.9% year-on-year to 14.1 million passengers in May 2025, the lowest monthly growth recorded in recent quarters. The data, analysed by PL Capital, reflects the impact of political tensions, adverse weather, and security-related disruptions such as the Pahalgam terror strike.
This flattish growth follows a relatively strong performance in earlier months and highlights the sector’s sensitivity to event-driven shocks. While April 2025 reported 8.5% growth and February saw over 11%, May’s underwhelming number signals a temporary pause in demand momentum.
Traffic Trend Highlights: Growth Slips Below 2%
Domestic traffic growth over the past six months shows a clear deceleration:
PL Capital’s data highlights the following six-month growth pattern in domestic aviation:
- Nov-2024: +11.9%
- Dec-2024: +8.2%
- Jan-2025: +11.3%
- Feb-2025: +11.1%
- Mar-2025: +8.8%
- Apr-2025: +8.5%
- May-2025: +1.9%
PL Capital notes that political activity across states and early monsoon activity in southern and northeastern corridors had a measurable impact on air traffic, especially on non-essential and discretionary travel.
Airline Performance: IndiGo Resilient, Akasa Leads Growth
Among major carriers, IndiGo posted a 6.8% year-on-year increase in passenger volume to 9.1 million, making it the most stable large-cap operator during the month. The airline’s load factor — a measure of seat occupancy — came in at 85.1%, compared to 88.4% in May 2024, reflecting a 330 basis point YoY decline.
However, PL Capital had previously forecast a sharper decline of 500bps, citing regional disruption risks. The reported number indicates that IndiGo’s core routes performed better than anticipated.
“Despite short-term disruption, IndiGo’s core routes held up better than expected. The load factor decline was milder than our estimate,” PL Capital noted.
Air India, including Vistara, AIX Connect, and Air India Express, reported a 3.7% decline in passenger traffic to 3.7 million, with the combined load factor dropping to 80.2% — a significant fall from 89.1% in the same month last year. Integration pressures and ongoing capacity alignment may be behind the drop.
In contrast, Akasa Air delivered the strongest relative performance, reporting a 12.7% increase in passenger numbers to 0.7 million. Its load factor improved to 91.4% from 90.3% YoY, reflecting robust uptake across leisure-heavy and price-sensitive routes.
PL Capital View: IndiGo Positioned for Stable 1QFY26
PL Capital believes the first quarter of FY26 could still shape up well for IndiGo, despite May’s traffic moderation. Yield trends — a proxy for average fare levels — remain flat YoY, according to PL’s fare tracker. If the airline executes its planned capacity additions, the quarter may deliver in line with prior estimates.
“The load factor has held up better than feared. If yields continue to be stable, the quarter could still turn out reasonably well,” PL Capital stated.
The brokerage continues to project moderate upside for IndiGo in the near term and retains its target price of ₹6,084.
Bottomline: Short-Term Softness, Long-Term Drivers Intact
The May-25 aviation update marks a rare dip in momentum for the sector, but PL Capital maintains that this is a short-term, event-driven pause, not a structural reversal. Among carriers, IndiGo’s resilience, Akasa’s agility, and the recovery of discretionary travel in the second half of FY26 will be critical indicators of overall sector health.
While elevated fuel costs and regional disruptions remain near-term risks, demand elasticity, capacity expansion, and stable pricing are likely to support a gradual return to trend-line growth in the coming months.
PL Capital
Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. It is based on several secondary sources on the internet and is subject to changes. Please consult an expert before making related decisions.
