The country?s largest private carrier by market share, Jet Airways, has put on hold plans to raise funds from the market on rising fuel price and low investment appetite in the sector.
?The current market condition is not good for fund raising,? chairman Naresh Goyal told FE.
Jet has been trying to raise funds for quite some time now through qualified institutional placement (QIP) but its proposal has hit regulatory hurdles. Responding to its proposal to raise funds through the overseas route, the civil aviation ministry has maintained the company would breach the foreign share holding norms for the sector, which is capped at 49%.
The ministry had last year asked the carrier to bring foreign direct investment (FDI) in the company in three years time.
Centre for Asia Pacific Aviation (CAPA) head Kapil Kaul said investor sentiment in the sector has gone down due to high fuel price and low fare triggered by irrational fare offered by Air India.
?Fuel price is on the higher side. Tactical pricing by Air India (which forces other carriers to follow suit) has also resulted into lower yield for carriers. These two factors have primarily brought down the investor sentiment. Three days before, they heavily discount fares. During this period the booking is maximum,? Kaul said.
With the aviation sector remaining on upswing since June 2009, Jet Airways has significantly improved its cash inflow. The airline expects a marginal dip in the overall air traffic growth in the current fiscal compared with last year with air travel getting expensive due to spiraling fuel price.
Naresh Goyal said that the domestic airline industry would clock a growth of 12-15% in the current financial year with international traffic growth being in the range of 15-20% during this period.
?We go by conservative plan,? Goyal said adding that the airline hoped to post profit in the fiscal.
Jet Airways posted a loss of R200 crore during the quarter ended March 31, 2011 against a profit of R225 crore in the same period the previous year. The airline’s performance is often considered the barometer for the overall airline industry.
Industry watchers expect double digit growth to continue in the sector in the current financial year albeit a marginal dip compared to previous fiscal. As per an CAPA estimate, the domestic air traffic would grow at a rate of 15% for the next 4-5 years.
