Thursday, June 22, 2017

Airline cos in a sweet spot; 18% passenger growth sustainable: Experts

The airline stocks have been doing well in a goldilocks like scenario. To discuss the dynamics of the industry as well as potential of a new player coming into the private listed space – Air India. CNBC-TV18 spoke to Amber Dubey, Partner & Head of Aerospace & Defense, KPMG and Mayur Milak, Senior Research Analyst, Indianivesh Securities.

Dubey is confident that the 18 percent passenger growth for the sector is very much sustainable because it is backed by some solid fundamentals. The oil prices look like they will be stagnant at the levels sub USD 50/barrel, the policy initiatives taken by the government have aided growth, the propensity to travel by air, higher per capita incomes and the economy growing at steady place – all these fundamentals will support growth of the airline sector.

However, on the flipside the airline space is vulnerable to security, safety issues and health issues like a disease outbreak where the bookings get cancelled, says Dubey.

The only headwind for the aviation sector is the infrastructure gap at main airports like Mumbai, Delhi and others like Goa, Pune etc but on the whole the current environment is conducive for growth.

Talking about the privatisation of Air India, Milak says that would help bring in lot of efficiencies to the carrier. However, it is unlikely to be a neck-breaking competition to the other private players. In fact it would be good for the whole of aviation space.

Therefore, the entire sector looks in a sweet spot, believe Milak, adding that it is supported by lower crude price, the demand looks structural and not seasonal.

So, the overall growth looks intact and valuations are still cheap. There is still value in SpiceJet.
22/06/17 Arthur Dubey/CNBC-TV18/moneycontrol.com

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