India’s aviation sector is on the cusp of a multi-decade growth trajectory, supported by demographic tailwinds, infrastructure development, and rising consumer demand, Jefferies said in its latest report. Despite temporary hurdles such as safety incidents and supply chain constraints, the brokerage believes the broader structural story remains intact, driven by low air travel penetration and an expanding middle class. To play this, Jefferies continues to like IndiGo’s domestic leadership plus the unfolding Int’l expansion and GMR Airports, which is a play on aviation growth, travel retail, land monetisation amid expected moderation on leverage.
India’s Aviation on Global Radar
According to Jefferies, India has emerged as the third-largest aviation market globally by passenger volume, behind only the US and China. However, it still accounts for just 4 percent of global air traffic, even though it houses nearly 18 percent of the world’s population. Jefferies highlighted that this disparity signals an underpenetrated market with significant headroom for growth. As per recent projections by IATA and Airbus, air traffic in India is expected to triple over the next two decades.
Jefferies noted that the country’s air connectivity is evolving steadily with the introduction of new routes and increased international services. Aggressive fleet expansion by domestic carriers and airport infrastructure investments will help drive industry-wide high single to low double-digit growth over the long term.
India’s Catch-Up Potential with China
While India’s passenger volumes have grown significantly, Jefferies pointed out that it still lags far behind China’s aviation infrastructure. China, with over 250 airports and more than 4,000 aircraft, services more than 700 million passengers annually, compared to India’s 200 million passengers, 850 aircraft, and 150-160 operational airports. Jefferies emphasized that despite China having an extensive high-speed rail network that competes with domestic air travel, it still far outpaces India in aviation, underscoring the immense potential for India to catch up.
International Travel on the Rise
Jefferies observed that international travel has become a key growth lever for Indian carriers. Post-Covid, Indian airlines have aggressively expanded international routes. Carriers like IndiGo and Air India are deploying wide-body aircraft and increasing their share of overseas operations. Jefferies noted that IndiGo’s international capacity has surged to 30 percent of its overall capacity, up from low double-digits a decade ago, and is likely to reach 40 percent by 2030. This internationalisation is also driving airport revenues through higher travel retail spending, particularly at metro airports like Delhi and Mumbai.
Structural Hurdles Still Exist
While the long-term opportunity remains attractive, Jefferies acknowledged that multiple challenges could act as temporary roadblocks. These include:
- Global aircraft shortages and supply chain disruptions, which could delay new aircraft deliveries to Indian airlines.
- High taxation on Aviation Turbine Fuel (ATF), which inflates operational costs.
- Geopolitical issues, particularly related to airspace access, which have led to longer and more expensive flight routes.
- Weak domestic Maintenance, Repair and Overhaul (MRO) infrastructure, increasing dependence on foreign facilities.
- Psychological spillovers from recent air safety concerns, which may impact passenger confidence in the short term.
- Despite these challenges, Jefferies believes these are short- to medium-term issues that will not derail the sector’s long-term growth path.
IndiGo and GMR Airports: Strong Proxies for India’s Aviation Upside
Among listed players, Jefferies reiterated its preference for InterGlobe Aviation (IndiGo) and GMR Airports. It sees IndiGo as a value proxy for the broader consumption theme, benefiting from its dominant domestic market share and growing international presence. The brokerage highlighted IndiGo’s forward valuation of ~12x FY26/FY27 EV/EBITDA as attractive, especially when paired with mid-teens earnings growth and a robust aircraft delivery pipeline.
Meanwhile, Jefferies also sees GMR Airports as a strong long-term play on India’s aviation ecosystem. The company is set to benefit from the growth in non-aero revenue streams, upcoming city-side land development projects, and favorable regulatory outcomes, including a recent win on aero tariffs at Delhi International Airport Ltd (DIAL). These developments enhance revenue visibility and cash flow generation for the airport operator, Jefferies noted.
In conclusion, Jefferies said India’s aviation sector is poised for multi-year expansion, riding on the back of favorable demographics, rising discretionary incomes, and expanding connectivity. While operational challenges remain, the long-term growth fundamentals are solid. Jefferies believes that leading players like IndiGo and GMR Airports offer attractive opportunities for investors looking to ride this secular growth story.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before making any investment decisions.
