Category Archives: Aviation Sector

Aviation industry is surely risky but a good bet

Airline industry has been one of the worst performing sector in last 5 years on our equity platforms, but now i feel that one should be surely taking a risky bet from current levels for a long term perspective and it could be multi-beggar. KFA grounding and Spice Jet liquidity crunch has almost brought scare for investors for this sector but recent restructuring in Indian aviation industry has been quite promising. If we take about particular companies, then new management of Spice Jet has been successful in bailing out company from liquidity crunch and management has also shown confidence on future of the company. Spice jet seems to have place a good order for new plans which is also positive for the guidance. Talking about Jet Airways, after it Etihad stake and closing of its low cost domestic carrier has provide beneficial as of now on their balance sheet. And Indigo Issue too has been successful on the D-street. So my gut feeling for this sectorial investment is strong.

Now lets talk about some primary numbers:

  • Revenue Passenger Kilometers

The RPK of an airline is the the sum of the products obtained by multiplying the number of revenue passengers carried on each flight by the distance – it is the total number of kilometres travelled by all passengers. So this numbers gives us a vague idea how air traffic has been in recent time. As in the graph, we could notice that last 3 years we have seen a increasing trend of RPK in india, which means more passengers have been travelling more kilometers which indicates sector revenue would have been increasing. This is surely a positive trend for the aviation markets and if we continue to witness such growth, we shall get  improving results.

Revenuekm_22feb

  • Load Factor

Load Factor can be simply defined as the capacity utilization of airline industry. Looking at the beneath graph, we could see that Load factor across indian aviation sector has been improving since 2014. Though in 2015 we saw some slump in mid-year but that is considered to be off-season for airlines. Last two months of the year which is generally season as NRI visit increases has seen load factor at the highest level in recent time.

load factor

This sums up saying that airline company’s next quarter results should be the best as Load factor and the  RPK both have improved. Ofcourse there are many other factors to study before investing but a overview and mood seems to be improving in the industry and one should surely have atleast one of 3 listed airlines in portfolio for the long term!!

Disclaimer: This views are purely my research. Invest on my idea only after studying markets and stocks throughly. Take advise of your financial consultant before investing. And equity markets are subject to market risk.