Weak investor sentiments, dip in passenger traffic and high operating costs have led the share price of airlines to plummet nearly 85% in the last one-year up to Friday, March 13. Airline stocks have dipped drastically internationally as well, and India is no exception to falling air travel due to the downturn, say industry observers.
Says an analyst from the finance firm IL&FS, ?The sector being cyclical, the revenue growth is sensitive to the overall state of the world economy. Second, high airport infrastructure costs, huge capital requirements and dwindling load factors are pulling the sector back from performing well at the stock exchange.? Stocks of Kingfisher Airlines dropped 83% to Rs 26.95 on the Bombay Stock Exchange (BSE) compared to a 52-week high of Rs 158.50 on March 13, 2008. Jet Airways stocks too plummeted 81% to Rs 127.35 as against Rs 649.25. SpiceJet stocks have also seen a southward direction at Rs 13.63 as against Rs 54.60, a year ago.
Aviation stock price movements indicate a certain unease since airlines have posted huge losses in the previous financial quarters. Jet Airways posted losses of Rs 214 crore, Kingfisher also had a loss of Rs 626 crore, while SpiceJet posts losses at Rs 18 crore for the quarter ended December 2008. ?The market is reluctant to pay richer valuations for airlines companies unless they see strong growth visibility,? says a broker with wealth management firm Sharekhan.
Says an industry observer, ?The aviation sector does not spell good news for investors. Like 2007-08 there is not a likelihood of any mergers and acquisition or consolidation which could lead to some positivism amongst the shareholder fraternity.?
However, according to the financial details available on the website of airlines like Jet Airways, the carrier is making efforts to get rid of excess capacity to control cost. The country?s largest private carrier has discontinued its Mumbai-Shanghai-San Francisco and Bangalore Brussels flights to mitigate losses. Simultaneously, even its archrival Kingfisher Airlines has put its plans to fly to the Gulf on hold.
Before the operators breakeven they have to settle their oil dues and airport infrastructure fee to the Airports Authority of India (AAI) worth Rs 4,000 and Rs 5,000, respectively. Airlines are taking efforts to trim their outgoing expenses like not hiring expat in their team, rationalising routes and curtailing flights to loss making destinations.
Crash!
• Stocks of Kingfisher Airlines dipped 83%
• Jet Airways stocks plummeted 81%
• SpiceJet sees southward direction