Friendly skies

Rising passenger numbers, healthy load factors and a tight control on costs could help the aviation sector limp back to profits after a gap of over two years. Little wonder, stocks of aviation companies have done far better than the broader markets in the recent past.
While 2008-09 was a disaster for the sector which recorded a year-on-year de-acceleration for the first time since 2002 due to the global downturn, passenger volumes since the start of 2009 have been on the upswing. DGCA data shows that passenger volumes went up 5.5 per cent between the January to November 2009 period over the same period in 2008. A large part of this increase has come during the August to November 2009 period when passenger volumes numbers have increased between 25-30 per cent year-on-year. Analysts expect the trend of double-digit growth in passenger volumes to sustain on the back of improving economic outlook.
With demand creeping back, airlines have, since July, been adding capacity, albeit in a gradual manner. Strong demand since then has meant better capacity utilisation with loads hovering at the 75 per cent range, considerably better than the 70 per cent loads during the September 2009 quarter. This has given airlines better pricing power, with some airlines mulling fare hikes on select routes from the current month.
Fuel, which makes for 40 per cent of the operational cost, however, could play spoilsport. ATF prices have risen by 60 per cent to Rs 41 a litre since its lows in May 2009. Despite the rise, it is still 10 per cent below year ago figures. With strong demand and higher ticket prices, this might not be an issue yet for the players, unless crude oil prices gain momentum for current levels of $82-83 a barrel.
12/01/10 Vishal Chhabria & Ram Prasad Sahu/Busuness Standard

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Categories: Indian Aviation- In General Jan 2010