Profitability boost for airlines

Mumbai: Strong year-on-year volume growth numbers for the October month ahead of the peak season and a drop in crude oil prices helped stocks of Jet Airways and SpiceJet gain up to 3.5 per cent on Wednesday. While Kingfisher Airlines’ stock has been an exception, the other two have done pretty well in the last one month— they are up 12 per cent each, as against the roughly 3 per cent fall in the BSE Sensex. The market is expecting the debt-laden sector to recoup part of its losses on the back of strong demand leading to a further price increase over the quarter, capacity rationalisation and improving operational parameters.
The domestic airlines, which have consistently posted higher passenger numbers in the recent months, flew 18 per cent more passengers year-on-year in the January-October period. The sector, which has grown 16 per cent annually over the 2004-09 period, is expected to grow by 14 per cent each in 2011 and 2012, on the back of 8-9 per cent growth in GDP, wrote HSBC analysts in a recent report.
A strong demand environment is also reflecting on the load factors that have averaged 75 per cent in CY10, compared to 69 per cent in CY09. These loads are likely to sustain as supply lags the jump in demand. HSBC analysts estimate that the demand-supply gap, which will peak in CY10 at 11 per cent, will continue to be favourable for the next two years at 4-5 per cent.
25/11/10 Ram Prasad Sahu/Business Standard

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Categories: Indian Aviation- In General Nov 2010