Soaring airfares have not won the Indian airline industry too many friends among regulators and passengers, but equity analysts seem pleased that the industry is poised to close this fiscal with record profits.
Aviation analysts are advising clients to buy airline stocks they once shunned, despite the loads of debt that continue to weigh down the industry. Meanwhile, airlines such as Jet Airways (India) Ltd and Kingfisher Airlines Ltd plan to tap domestic and international investors to raise funds and pare their debt.
According to consultancy Centre for Asia Pacific Aviation (Capa), private airlines are expected to post a profit of $300 million (Rs.1,350 crore today) in the current fiscal. The industry had posted a net loss of Rs.7,000-8,000 crore in fiscal 2010, including the Rs.5,551 crore loss by Air India.
In October, the industry reported passenger traffic growth of 16.2% year-on-year to 4.61 million travellers and domestic brokerage IDFC Securities Ltd said “the sector is on track to achieve 15% growth in FY11”. IDFC Securities analyst Nikhil Vora estimates that private carriers, excluding Kingfisher Airlines, and Air India will make a combined profit of Rs.1,700 crore this fiscal.
Owing to an economic slowdown, excess capacity and high costs, Indian carriers incurred a collective loss of $2 billion in fiscal 2009, the same as in 2008, causing them to default on payments to the Airports Authority of India and oil marketing companies.
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