Healthy travel demand lifts aviation stocks

Airline stocks have been moving northwards in the last month on the hope that aviation industry could be well on the path to recovery. In the first quarter ended June 30, the airlines' operational income has improved, and with the growth in air travel demand, the airlines say the future outlook looks positive. Since July 2, Jet Airways stock has risen 27 per cent to close at Rs 674.60. During the same period, Kingfisher Airlines was up 6.6 per cent to close at Rs 53.30 and SpiceJet was up 9.4 per cent to close at Rs 62.05. “Strong growth in (passenger) traffic and improved performance at operational level is reflecting in the stock prices of airline companies,” said Senior Analyst, Mr Mahantesh Sabarad, from Fortune Equity Brokers India. Another analyst from an Indian brokerage firm said that yields are stable and there are signs of recovery in the industry, which are pushing up the stock prices. Domestic airlines flew 45.04 lakh passengers in June, up almost 22 per cent against June 2009. In May, the airlines flew 47.85 lakh passengers which was again almost 22 per cent increase compared to the same period last year. According to a recent research report by IDFC Institutional Securities, “Post hitting the peak traffic levels in FY-10, the Indian aviation sector is expected to see continued traction in passenger growth (for April 2010, Indian aviation reported a 26.3 per cent growth at 4.1 million). With calibrated increase in capacity and traffic expected to grow two times the supply, yields and loads for the Indian aviation industry are expected to improve going ahead. With the cost curve of the industry at its bare bones, we expect the industry to return to profitability after 3 years of consistent losses”.

---

The above article was extracted from Skyline updates of Skyline College. Skyline College is amongst the top MBA and BBA institutes in Delhi, Gurgaon (NCR).