Take-off time for aviation sector

Mumbai: It takes a brave man to buy an airline. Ask liquor baron Vijay Mallya, who has since taking over Deccan Aviation in September, 2008 accumulated losses of around Rs 2,500 crore.
Still, businessmen find the lure of owning an airline hard to resist.The latest to join the league is Kalanithi Maran, who has picked up 37.75% stake in SpiceJet and will have to make an open offer for another 20%. His total payout on this score is expected to be around Rs 940 crore.
SpiceJet took off in May, 2005, and has accumulated losses of around Rs 550 crore. In fact, it has made losses in 14 of the 20 quarters since inception.
That’s the business Maran is taking over. No saying what gives him reason to suppose it will do any better under him.
True, a revival in the domestic economy and increased corporate and leisure travel in recent times has improved the prospects of the airline companies somewhat. While passenger traffic grew 16% year on year in FY10, growth in January-April, 2010 has been 22% over the same period last year.
Conservative capacity addition and steady fares have led to better load factors for the carriers. Over the last two quarters, the load factors for SpiceJet have been around 79%. Kingfisher has reported a load factor of 71% for the whole of FY10. Jet Airways has seen occupancy levels of 81.6% on its international routes while maintaining 73% levels in domestic operations in the quarter ended March 31, 2010.
Small wonder, the operating margins of the airline industry are on the rise.
15/06/10 Nitin Shrivastava & Vivek Kaul/Daily News & Analysis

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Categories: Indian Aviation- In General Jun 2010