Markets
BSE See NSE See 39,345.19
232.45 (0.59%)
collapse Related Readings collapse

Indian Aviation Sector: On Borrowed Wings

| 3/7/2013 9:00 PM Thursday

The Indian airspace is buzzing with a fresh spell of activity, with foreign players scanning the horizon for opportunities to grow their wingspan. While this indicates that foreign players still foresee value in the Indian aviation space, will it be correct to allow foreign players to capture the Indian skies? Prasanna Bidkar takes stock.


The aviation space in India has suddenly turned quite vibrant, with fresh news arriving from all quarters. Whether it is the special price cuts announced by leading aviation companies or the announcement of Kingfisher Airlines paying salaries to its employees, or for that matter approaching the aviation regulator seeking licence renewal despite being in dire straits, the developments have surprised one and all on the street. The surprise is quite natural, with aviation companies doubled over under the pressure of high debt burdens and mounting losses, and investors shying away from the aviation pack. We at DSIJ had also categorically asked our readers to stay away from the sector in a special report ‘Airline Industry: A Hard Landing After A Dream Run’ carried in Issue # 4 (dated February 10, 2013).

What has suddenly changed for the sector to be in the limelight again? As they say, change is the only constant in life and the aviation sector is no exception to it. Apart from the factors already mentioned, a lot more has happened in the sector, putting it under the spotlight again. The most significant is the world’s leading low cost carrier, Malaysia-based AirAsia, seeking permission to enter India’s domestic airspace. What makes this news more noteworthy is AirAsia seeking an alliance with the trusted and efficient Tata Group.

Here is a detailed analysis which seeks to answer that one vital question – will the aviation sector succeed in its attempt to get new wings?

Special Offers – Will They Help?

It is a known fact that all the Indian aviation players are facing a financial crunch and are always looking out for new avenues to generate cash flows. The increased FDI limit provided them a good opportunity to raise funds by diluting or selling stake to foreign airlines. However, the fact remains that not a single deal on this front has happened so far. Though Jet Airways and Etihad were reportedly close to a deal, that too seems to have fizzled out.

So, aviation players put in place a different kind of a strategy to get over the cash crunch – offering specially discounted fares. SpiceJet kicked off the trend by offering forward tickets at special rates. This was followed by other players like Jet Airways, Indigo and even the state-run Air India. While SpiceJet managed to garner around Rs 300-350 crore, Jet Airways targeted to generate Rs 600-650 crore. This, for obvious reasons, seems to be a better way of generating cash flows rather than sinking in debt. Subhash Goyal, Chairman, STIC Travel Group concurs with our view. He says, “According to me, these fare cuts by airlines are primarily tactical measures to boost business and improve their cash flows. It seems to be a better option rather than borrowing more funds from banks”.

 

Find More Articles on: DSIJ Magazine, Special Report, Product, Large Cap, Small Cap

«« First « Previous |1 2 3 | Last ››
news letter

More for the early bird.

Get the post-market reports and breakfast news right in your inbox. See latest »

DSIJ Mindshare

12345678910Last

Tiger Logistics topline to grow by 10%--buoyant over infra sector status to logistics sector

Tiger Logistics topline to grow by 10%--buoyant over infra sector status to logistics sector

Logistics sector will play a vital role in making the concept of ‘Make in India’ a success. This will be further aided by some of the recent steps taken by Government of India such as granting of infra sector status to logistics sector.

Best and worst Performing Sector Funds of Year 2017

Best and worst Performing Sector Funds of Year 2017

As the year-end has approached most of you are eager to know the mutual fund movers and shakers of the year 2017. Read on to find the performance of various sector dedicated funds.

Markets may start positive, but volatility likely due to F&O expiry

Markets may start positive, but volatility likely due to F&O expiry

The start of the F&O expiry day is likely to be in the green, but volatility may creep in with the progress of the session. The SGX Nifty suggests that the Nifty could open at 10,525 with gains of 32 points at the opening bell. 

Pidilite announces buyback of Rs 500 crore

Pidilite announces buyback of Rs 500 crore

The buyback offer comprises purchase of up to 50,00,000 equity shares. The buyback offer size comprises 0.975 per cent of the total paid-up equity capital of the company.

Bank Nifty drags markets to close in the red

Bank Nifty drags markets to close in the red

The late session fall in Bank Nifty changed the direction of the market, leading to a marginal fall in the benchmark indices. Bank Nifty yet again resisted at its multiple point downward sloping trendline level at 25733.

Six major underperforming MF schemes having higher expense ratios

Six major underperforming MF schemes having higher expense ratios

Mutual funds with a large size of assets under management (AUMs) are supposed to have lower expense ratios. However, there are schemes with large AUMs but having higher expense ratios and generating lower returns. 

Nifty Pharma supports market; Sun Pharma at bullish reversal

Nifty Pharma supports market; Sun Pharma at bullish reversal

Nifty Pharma index has come in as the healer in an otherwise sluggish market. Index has given a consolidation breakout at the 9420 level today and if the it sustains 9420, followed by 9628 on the upside, it has a long way to go.

Ten stocks close to their 52-week low

Ten stocks close to their 52-week low

Following stocks are close to their 52-week low as at 12.35 p.m. on December 27.

Ten stocks close to their 52-week high

Ten stocks close to their 52-week high

The markets on December 27 opened gap down. BSE Sensex is trading at 34,068.15, up by 57.54 points and the Nifty is trading at 10,539.45, up by 7.95 points.

Five stocks with selling interest

Five stocks with selling interest

Overall volumes in futures & options currently stand at 62.75 lakh contracts with a turnover of Rs. 5,19,204.72 crore.