InterGlobe Aviation (NS:INGL), the operator of India’s largest low-cost airline IndiGo, experienced a 6% increase in its stock price on May 3, following the bankruptcy of rival airline Go First. The insolvency of Go First, which held a 6.9% market share in March 2023, is expected to remove 9% of domestic supply, potentially benefiting IndiGo and SpiceJet (NS:SPJT). Bank of America (NYSE:BAC) predicts that this development will improve IndiGo’s competitive position, allowing the company to capitalize on opportunities presented by the domestic market.
Indian air traffic has been making a strong recovery after Covid-19 lockdowns, with airlines transporting a record-breaking 456,082 passengers in a single day as of April 30. Go First attributed its inability to meet financial obligations to the “faulty engines” provided by US company Pratt & Whitney, which grounded 50% of its fleet.
The low-cost carrier has filed an application for voluntary insolvency resolution proceedings before the National Company Law Tribunal. Before this development, Go First had been seeking to raise about INR36bn ($480m) through its initial public offering, which has now been deferred once again due to weak sentiments and reluctance from owners to infuse funds into the loss-making company. The potential exit of Go First is seen as a positive development for sector consolidation, as it eliminates one competitor from the market.