Regarding whether to buy the company, you must remember that the situation on oil and dollar will continue to be tough in the coming year also. Air India is ramping up fast and other airlines are rushing in to fill the space. So the competition will continue to be intense and the prices of tickets will continue to be under pressure. Of course, Indigo remains the market leader but it is going to face intense pressure on the performance front. Also, there is currently a dispute going on between the two principal promoters on the distribution of control of the airline and ideally should wait for that to get sorted out. The valuations are expensive and you really cannot expect any sharp rally in prices.

Indigo has benefited from the closure of Jet but the operating environment is still far from favourable for aviation companies. For the March quarter, the market leader Indigo Airways reported a 5 fold increase in profits to Rs.589 crore. This was largely because Indigo benefitted from the suspension of airline services by Jet Airways. Also the sudden shortfall in supply also led to higher prices of air tickets and Indigo also benefited from that trend. However, the airline has made some big losses in the previous quarters and the full year profit of Indigo was just Rs.156 crore. That is almost 90% lower than the profits of the company for the previous year, which means the company has taken a major hit on a full year basis.

The last financial year was a very tough year for the airline with pressure from almost all sides. The crude oil prices were higher so the price of ATF fuel was also higher. Incidentally, ATF prices account for nearly 65% of the operating cost of an airline. The weak rupee also meant that Indigo had to pay out more in the form of lease rentals on its aircraft. Above all, the airline also came under pressure due to competition from other airlines as most airlines had to drop prices to stay competitive. It is only in the fourth quarter that most of the airlines including Indigo experienced better pricing for their services.