Investors wary of airline IPOs

New Delhi: Deals are being struck and a growing number of Indians are taking to the skies, but investing in airline stock remains unknown territory for most investors.
A senior aviation expert told The Statesman that in the face of so much flux and uncertainty, it is difficult to tell which airline company will be around three years hence and whether it will be making profits. Moreover, some airlines are reporting losses. Jet Airways and Air Deccan had gone in for IPOs (initial public offerings) in February 2005 and May 2006 respectively. Of this, the latter’s IPO had struggled to find takers, raising questions on the viability of the low-cost airline model in an increasingly crowded market.
However, Jet Airways IPO of at least $375 million was fully sold within minutes of opening in February 2005, as investors rushed to the first Indian airline issue in a decade on hopes of robust travel growth. The IPO for 17.27 million shares or 20 per cent of expanded equity generated demand for 73 million shares at the end of the first day. The upper end of the offered ranged from Rs 950 to Rs. 1,125.
However, there hasn’t been any attempt to go in for IPOs from any airlines thereafter. “We are waiting for the airline market to consolidate and then only we could go for such IPOs…” said a senior official of Indian, the national carrier. The battle is for market share and it is being fought at the expense of profits.
03/05/07 Sanjay Singh/The Statesman

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Categories: General Aviation May 2007