It's clear skies, for now

Mumbai: While debt and fuel costs remain key issues, recent growth in passenger volumes and operational improvements can put the aviation sector on the profit track.
A series of positive news flows over the last few weeks have seen aviation stocks jump 11-30 per cent. Restructuring of loans, expansion of existing fleet, capital-raising plans, a fall in aviation turbine fuel prices and steady demand over the last two quarters have been welcomed by the Street. Also, the sector, which has been grappling with fuel costs and low demand on account of a slowdown as well as terrorist attacks and natural disasters, is clawing its way back into profitability on the back of higher volumes and operational efficiencies.
After a not too good 2009, passenger volumes – which have been rising since January this year – have consistently been above the four-million mark, peaking in May with traffic at 4.7 million, the highest ever. For the January to July period, domestic traffic at 30 million has been over 20 per cent higher than the corresponding period last year.
For July, the last month for which data is available, passenger volumes at 4.16 million was 21 per cent more than last year. However, given the monsoon factor, volumes were sequentially down 7.6 per cent. The improvement in economic growth is positive for the sector and should help sustain traffic at healthy levels.
That the demand is strong and could play out for the near to medium term can be gauged by the fact that airline companies have been adding incremental capacity over the last seven months. Since load factors have been consistently hitting the 75-80 per cent band over the last few months, airlines are increasing their fleet size well by placing orders for new aircraft.
10/09/10 Ram Prasad Sahu/Business Standard

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Categories: Indian Aviation- In General Sep 2010