Top 3 Aviation stocks riding India’s record 154 lakh passenger surge

India's aviation sector is growing rapidly. Records show that India has welcomed a surge of 1.54 crore passengers. The growth seen in the aviation market has the potential to aid aviation stock investors. As demand continues to increase and the Indian aviation sector grows, early investors can see high returns in top aviation stocks. The attention is now on airline stocks in India.

Record Passenger Surge Fuels Sector Momentum

India becoming an aviation superpower is evidenced by the surge in air travel, particularly during the 2022-2023 travel period, when 1.54 crore people flew domestically. This growth is backed by the expansion of the economy, increased air travel accessibility, and the rise of recent urban migration. 

This growth is primarily within the domestic market, driven by low-cost carriers with aggressive ticket pricing, which in turn is fueling the profitability of the major carriers and boosting aviation stocks in India. This is also a key aspect that positively contributes to the growth of the Indian aviation sector. The growth trajectory indicates that India will become the third-largest aviation market by 2027.

Operational metrics and efficiency allow carriers across the board to improve net profitability and airlines to maintain a low-cost operational burn. The expansion of international travel, coupled with the post-pandemic uplift in passenger travel, allows the majority of stakeholders to achieve net positive operational swings. 

The industry surge, particularly in international travel, fuels the operational profitability of major market leaders and is directly tied to the profitability uplift of key stakeholders; more beta-driven than the direct performance of the market.

For the majority of investors looking to buy aviation stocks, the low international travel sector growth, coupled with the pre-pandemic balance sheet swings, allows for a relatively secure and positive to high growth investment to fund the profitability of investors' operational burn.

Top Aviation Stock 1: InterGlobe Aviation (IndiGo)

IndiGo, also known as InterGlobe Aviation, is the most prolific low-cost airline in India with an 80% market penetration of the domestic sectors, which makes IndiGo a clear economic leader among top aviation stocks. The total market cap of InterGlobe is at 2.32 lakh crore and is pegged at approximately 6000 per share.

Notably, the ROE and ROCE performance metrics for IndiGo at 129% and 168% respectively, lead the sector, along with fleet utilisation and cost leadership. The cost-effective practices of the airline firm enable its business model to capture the growing demand within the Indian aviation sector, thereby earning the company a position among the most attractive aviation stocks to buy.  

The company recently started deploying wide-body aircraft on international routes, which enables the firm to build more diversified revenue streams. With the growth of the passenger segment, and given the scale of IndiGo, it has a competitive advantage to grow its airline business to gain more market share and profit, which enables long-term extensive funding growth for holders of the airline stocks in India.  

Top Aviation Stock 2: SpiceJet  

With a newly developed focus on domestic short-haul routes, SpiceJet has become a more compelling airline turnaround stock. The company, post-restructuring, has become more accessible, and with growing market capitalisation and load factor, it has become attractive for growth investors in the aviation stock space.  

The company's aggressive fleet reactivation, coupled with demand-driven cost mitigation, should drive SpiceJet profitably as Indian aviation sector growth continues. During peak holiday travel, SpiceJet has come to positioned itself among the best for capturing the demand. With a high-used fleet, SpiceJet rides the seasonal airline stock India wave among the most competitive.  

Debt remains a factor in need of concern, however, for those investors looking for aviation stocks to buy, the undeniable and pronounced positive cash flow in passenger volumes is the high beta sector play on the anticipated SpiceJet upside.  

Top Aviation Stock 3: FlySBS Aviation Ltd.  

We have FlySBS Aviation to finish off the list of top aviation stocks. It has earned 943 crores and with share prices around 545, it is a small player in the 154 lakh passenger market with efficient regional connectors.  

FlySBS Aviation offers the most promising potential in the stocks of India. It differs from other airliners with moderate airliner stocks in India, operating services and other strong operational airliner metrics, placing it in the small airliner market. FlySBS offers increasing operational metrics and upward trends in operational performance in the small airliner market, providing a positive airliner forecast.  

Within the airliner market, it is complementary to other larger airliners, rewarding operational profits to the smaller airliner market. Current operational metrics confirm to me a forecast of upward trends, especially in the small airliner operating market. FlyS Aviation has shown a positive trend in profits.  

Uplifting Indian operational metrics will allow FlyS to manage operational indicators in the smaller markets of the small operational airliner market. Uplifting Indian operational metrics will allow Fly to manage operational trends in the smaller operational markets. Operational indicators will be most evident in the market for small airliner services. This structural change benefits businesses that have a good balance and good execution abilities. 

Market Performance Comparison

This table explains how different stocks perform in terms of the varying degrees of passenger surge, with IndiGo dominating in scale and the others providing value plays in aviation stocks India.

Risks in Aviation Stocks India

Despite the boom, airline stocks India continue to have a high degree of volatility because of the volatility in ATF prices, which make up 40-50% of operational costs. A weaker rupee and rising geopolitical tensions can increase their costs and squeeze air carrier margins, which is a reason for caution when it comes to aviation stocks to buy.

There are overcapacity risks if a large number of new players enter the market and fill it, which can lead to a decrease in profit margins and high volumes. Investors in the top aviation stocks should focus on companies that have good hedging policies and a reasonable degree of cost structure to survive the challenges. 

Changes in regulations, such as the allocation of slots to airlines at overbooked airports, add another degree of uncertainty. Holding a diversified portfolio of equities in aviation stocks India helps to decrease the risk from a single stock, particularly when it comes to the Indian aviation sector.

Investment Strategies for Aviation Stocks to Buy

Look for aviation stocks to buy that have good passenger load factors of over 85%, and a debt to equity ratio of less than 2x, which provides a buffer for volatility. Invest 10-15% of your total portfolio in this sector, keeping a balance between high market cap players like IndiGo and high growth market cap players like SpiceJet. 

Look for technical indicators: Buy when the stock is at a dip around the 200-day moving average, especially after earnings announcements, which indicate that the company has captured the benefits of the surge. Long-term holders are rightly positive about compounding growth in India’s aviation sector.

Tracking DGCA’s quarterly traffic data will help identify entry points. Combined with airport infrastructure plays such as GMR, it provides comprehensive coverage to India’s airline stocks.

Future Outlook and Opportunities

The initial jump of 154 lakh is just the beginning, with estimates forecasting 8-10% CAGR until 2030, predominantly from VFR travel and growing premium travel. Top aviation stockssuch as IndiGo, will likely have EPS double and reward the long-term holders.

The sector is also likely to benefit from the adoption of sustainable aviation fuels and the integration of drones in services. As India adds 100 more airports, India's airline stocks will also benefit from the emerging ancillary markets of MRO and technology services.

Like the Air India-IndiGo dynamics, strategic mergers will likely continue to consolidate the sector, particularly within the more efficient players. This transformation reinforces aviation stocks to buy as essential for any growth-oriented portfolio.

DISCLAIMER: This blog is NOT any buy or sell recommendation. No investment or trading advice is given. The content is purely for educational and information purposes only. Always consult your eligible financial advisor for investment-related decisions.