Jefferies' Aviation Sector Picks: IndiGo and GMR Airports for Long-Term Growth

Jefferies has identified IndiGo and GMR Airports as top picks in the Indian aviation sector. They believe India's travel industry has healthy long-term fundamentals, with IndiGo leading growth and trading at a reasonable valuation. GMR Airports is seen as a strong proxy for India's aviation growth, with lucrative non-aero business and earnings benefiting from recent revisions in aero tariffs. Jefferies expects international travel to accelerate, with Indian airlines expanding overseas routes and capacity. However, they also note challenges such as global aircraft shortages, supply-chain bottlenecks, and high ATF taxation.

India's aviation sector presents a compelling long-term growth story, supported by favorable demographics, infrastructure expansion, and increasing consumer spending, despite near-term operational challenges, according to Jefferies. The brokerage has identified IndiGo and GMR Airports as top picks in the sector, highlighting their strong fundamentals and potential for growth.

India, currently the world's third-largest aviation market by passenger volume, has significant under-penetration in air travel, with air trips per capita among the lowest globally. Jefferies projects India’s air passenger traffic to triple over the next two decades, with an 8.9% CAGR in revenue passenger kilometers (RPK) through 2044 [1].

IndiGo, the leading player in Indian aviation, is positioned as a top pick by Jefferies. The airline has a dominant domestic market share, a growing international footprint, and a forecast mid-teen earnings growth. Its EV/EBITDA valuation of around 12x for FY26/FY27 is seen as reasonable. The airline has been expanding its fleet and international routes, with international capacity rising to nearly 30% of its total, from low double digits a decade ago, and projected to reach about 40% by 2030 [1].

GMR Airports, which operates major hubs like Delhi and Hyderabad, is seen as a strong proxy for India's aviation growth. Jefferies forecasts around 25% EBITDA CAGR between FY25 and FY28, supported by revised tariffs, land monetisation, and a recovery in travel retail [1]. The company's non-aero business and earnings benefit from these revisions, making it an attractive investment opportunity.

International travel is emerging as a key growth driver for Indian airlines. IndiGo and other Indian carriers are increasing wide-body aircraft orders and expanding direct overseas routes, lifting airport retail revenues, particularly at metro airports [1].

However, the sector faces several headwinds, including aircraft supply bottlenecks, high aviation turbine fuel taxation, weak MRO infrastructure, airspace-related geopolitical risks, and short-term sentiment issues stemming from recent air safety incidents. These challenges may impact the sector's near-term performance but are not expected to derail the long-term growth prospects.

In summary, Jefferies sees long-term value in the Indian aviation sector, with IndiGo and GMR Airports as key picks. The sector's healthy fundamentals, driven by favorable demographics and infrastructure expansion, present a compelling investment opportunity despite near-term challenges.

References:
[1] https://www.investing.com/news/stock-market-news/india-aviation-a-compelling-long-term-play-despite-nearterm-hiccups-jefferies-4133033
[2] https://www.facebook.com/globalindians/posts/did-you-know-indian-airlines-have-added-more-new-aircraft-in-the-last-12-months-/1327643842699877/
[3] https://www.forbes.com/sites/kevinrozario/2025/07/14/travel-food-retailer-ssp-sees-debut-indian-ipo-decline-in-value/